House or unit, which is the better real estate investment?
Deciding between a house or unit is one of the bigger decisions you’ll make as a property investor.
The range of property types available to investors has widened significantly in recent years. You can now choose from the traditional house and block of land, to an array of medium density dwellings including flats, villas, town houses, apartments and duplexes.
Which appreciates faster?
A common myth in real estate is that house prices appreciate faster than unit prices. This is simply not true.
The facts reveal there is actually very little difference. For instance, since 1991 the median price of both houses and unit sales in Perth have both risen by approximately 45 per cent, while recently the median value of units has actually outperformed houses.
The biggest difference between houses and units is that the purchase price is generally less for units than houses, making them the more affordable option.
There are also increasingly fewer houses available to purchase in suburbs close to the city, with units proving a more effective way to deal with the growing population.
Decrease in average block size has implications
It’s also worth noting that the decrease in average block size over the past 20 years has impacted the housing market.
Nowadays more and more modern houses are being built on small, low maintenance blocks, so their maintenance costs are generally less than homes on large blocks of land.
With this trend continuing, the cost of upkeep between homes and units is likely to become increasingly similar, so it makes sense to consider each property on its own merit.
Irrespective of whether you’re looking at a house or a unit, you should focus on the quality of construction, the likely on-going costs, the location and the competition from similar properties either existing or under construction.