While historically houses have made up the majority of the market, the current living trends have driven apartment demand up dramatically and while all of us were taught to buy your own ‘piece of dirt’ the current generations are foregoing these ideas to live closer to work in major cities in densely populated apartment blocks and residential developments.
Many young families these days are time poor and they are not motivated to work in the garden or potter around maintaining their dwelling, they much prefer to live in an apartment that is private with no maintenance requirements. So that means that apartments are growing in demand and with demand comes higher rental yields and high potential capital growth. So while people continue to want to live in major cities, the demand will always be there for apartment blocks.
Apartments are the most popular investment type as they are what some would call the easiest option to start investing in property. They are easy to rent, often located in high-density areas and in most cases, the ‘buy-in’ price is much lower.
Units should be close to major cities with not too many units in the development, low body corporate, a high amount of owner-occupiers with a low number of available rental units in an area that is densely populated, so further development is unlikely.
Buying in large developments exposes you to fire sales that devalue your asset or rent reductions to get tenants into the development that reduces your overall yield.
House are the holy grail of property investment as they have a large land component however they should be located on the urban fringe and outskirts of a major city and not part of a development where multi-stages are being built with all houses similar in size and design (and no price increases have been allocated for each stage).
House and Land packages offer far more potential for capital growth and add-on value however the entry level price is way higher and a stretch for a lot of people, so obviously the type of property you buy is purely decided by your situation.
New houses are often located in large estates which, in theory, means that while new houses are being built in the estate your value does not increase until there is large demand and lack of supply which in most cases can take several years.
Investing In Land
Some people say to put your money into land because they can’t make any more of it (land). While this is partly true as they are reclaiming some land these days from dredging and what not, the overall theory behind it is very sound.
The longer you can hold onto to vacant land, the more demand is driven up and so is the price. With land availability drying up you can basically write your own ticket if you are the last man standing with the only available land in an area.
Of course, for every action, there is an opposite reaction. The holding of land is very expensive and there are no real options for rental income and no depreciation benefits as depreciation is only offsetting the building and internals, not the land. And while the land value will continue to go up, you have to come up with the money repayments and many banks won’t lend on an investment where there is no direct financial return from rent so really the buyer needs to come up with a lot of the purchase funds directly and this can be risky as sustainability can be a problem. The upside is if the zoning changes in the area the block could triple in value in a short period of time, but who can see into the future.