Price Growth - Houses vs Units

[mgs4]

I often read that perception that houses provide superior capital growth and to compensate for that they have lower rental yields than units (which have comparably lower capital growth). The logic for this would seem to be that owner occupied demand is the real drive of price growth, as most houses are

Owner occupiers often prefer houses to apartments as such house prices can be driven higher with less consideration for rental yield, and can have low yields. In comparison units have relatively less owner occupied demand and may not experience the same price growth and may experienced more considered rental yield growth.

What do people think of this analysis to current houses vs units relative to how this may evolve over time?

 

[FelixL]

Its a forever debate, doubt there will be conclusion ever

My personal preference is units with purchase price lower than replacement cost, good rental yield to be 100% financed and still neutral. This way I can buy quite a few units, relying on market/inflation for long term capital gain. For house the negative cash flow tend to mean higher risk and lower number you can buy

I feel house is good if one wish to add value through renovation or sub division. For lazy people like myself will be more suited to units

 

[strongy1986]

A house close to amenities or in a desirable suburb will smash units

A house in an outer suburb which is not desirable - much of a muchness

Close to amenities - one day you can bulldoze house and build units!

Desirable suburb - people want to live there with their family, people are prepared to pay more and more for a house in these areas as opposed to units in these areas which are seen as stepping stones

Outer suburbs - people will just move on to the next house and land package

 

[thatbum]

What do people think of this analysis to current houses vs units relative to how this may evolve over time?

Sounds about right - but we're talking so generally here that I can't really see any use for that analysis?

Also, I'm not sure I agree that units would have generally higher rental yield growth either. I'm pretty sure houses remain popular with renters.

 

[MTR]

I think one should never compare houses vs units, I don't actually understand why investors do this???

Its all about markets/areas and what is happening at any given time. For example Nerang QLD is now a rising market, however you would not currently buy units in this market because there is an oversupply, you would however buy houses because there is not enough stock. It goes back to supply vs demand. Obviously units in this area will not rise while there is an over supply.

I am from Perth and homes in majority of blue chip areas close to city have fallen back and difficult to sell at the moment, however in the same areas units fly out the door and there is so much pent up demand, once again its about supply vs demand.

My point is don't compare they are different beasts, look closely at what is happening in a particular area, how quickly they are selling and what is selling and what is not selling.

Cheers
MTR

 

[mgs4]

Sounds about right - but we're talking so generally here that I can't really see any use for that analysis?

Also, I'm not sure I agree that units would have generally higher rental yield growth either. I'm pretty sure houses remain popular with renters.

Hmm I'm not sure I'd agree with this. Change demographics have smaller household sizes, more for couples without children. Units are ideal low maintenance housing.

 

[MTR]

Units may generally have a higher rental yield, however you need to consider strata fees which can be very high, in particular new product and will effect your yield.

 

[perthguy]

I think one should never compare houses vs units, I don't actually understand why investors do this???

People compare real estate and shares, so why not?

But really, people want to know which will get better capital growth over time, a unit or a house? This is the wrong question. As you said, it depends on the area.

For example, in Cloverdale, what has better growth, a unit or a house? It depends. Is the house a development site? That will make a difference. If a good deal is a good deal it will stack up. It won't matter if it is a unit, house or development site.

 

[impala67]

People compare real estate and shares, so why not?

But really, people want to know which will get better capital growth over time, a unit or a house? This is the wrong question. As you said, it depends on the area.

For example, in Cloverdale, what has better growth, a unit or a house? It depends. Is the house a development site? That will make a difference. If a good deal is a good deal it will stack up. It won't matter if it is a unit, house or development site.

+1

trust the numbers only !

house v house and unit v unit, not mixed.

 

[allsuccess]

Currently, I'm almost getting priced out of a suburb that I like. However, Units are well within reach. I'm now considering weather to look for a unit in the suburb that I like OR go out to the next suburb and buy a house.

 

[impala67]

Currently, I'm almost getting priced out of a suburb that I like. However, Units are well within reach. I'm now considering weather to look for a unit in the suburb that I like OR go out to the next suburb and buy a house.

Focus on the future productivity of the asset you are considering. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. The fact that a given asset has appreciated in the recent past is never a reason to buy it.

So, in that suburb compared to price you will pay - will the unit be the better purchase in 10 years time or the house ?

Without knowing the suburbs being considered, as they aren't named, and no reason to...if you answer the statement above honestly, I reckon you will have your decision.

 

[allsuccess]

So, in that suburb compared to price you will pay - will the unit be the better purchase in 10 years time or the house ?

Without knowing the suburbs being considered, as they aren't named, and no reason to...if you answer the statement above honestly, I reckon you will have your decision.

Thanks impala67. I'm thinking of Ringwood, Ringwood East, Heathmont. Got reasonably good private/public schools, shopping, transport, lot of new infrastructure etc... So, I think units would do well in these suburbs. I can't see how house prices would drop in these suburbs.

Next suburbs out are Croydon South, Bayswater North. I'm not sure if these will perform as well.

 

[strongy1986]

Lets settle this

All units are built on previous house/home sites

Block size is the key point not wether it has a house or not

Ever wondered why you can afford a unit in a inner suburb for 500 yet a house is 3 mill, I bet it didn't cost 6 times as much to build the house - land...

 

[mgs4]

Lets settle this

All units are built on previous house/home sites

Block size is the key point not wether it has a house or not

Ever wondered why you can afford a unit in a inner suburb for 500 yet a house is 3 mill, I bet it didn't cost 6 times as much to build the house - land...

Isn't this one good example of why houses are more valuable than units? Because houses have future development/sub-division where as units do not.

 

[impala67]

Thanks impala67. I'm thinking of Ringwood, Ringwood East, Heathmont. Got reasonably good private/public schools, shopping, transport, lot of new infrastructure etc... So, I think units would do well in these suburbs. I can't see how house prices would drop in these suburbs.

Next suburbs out are Croydon South, Bayswater North. I'm not sure if these will perform as well.

The future productivity of the asset is the key. If you can't develop the house for 10 years, your investing is over for 10 years. If you can buy units every year for 10 years, you have 10 life cycles of units to use. Or, even every second year.

The short article attached touches on a few things and is a topic that is a never ending debate.

http://www.yourmortgage.com.au/article/apartments-or-houses-which-is-the-better-investment-84450.aspx

"Ultimately, there are pro's and con's attached to any dwelling type, and the right investment for you will depend on your risk profile, investment strategy and financial position." (quoted by the article)...and don't let anyone tell you any different.

Regarding the suburbs stated, just start following the suburbs and know your numbers well, so you can make a good informed decision.

 

[Noideaatall]

I think one should never compare houses vs units, I don't actually understand why investors do this???

Its all about markets/areas and what is happening at any given time. For example Nerang QLD is now a rising market, however you would not currently buy units in this market because there is an oversupply, you would however buy houses because there is not enough stock. It goes back to supply vs demand. Obviously units in this area will not rise while there is an over supply.

I am from Perth and homes in majority of blue chip areas close to city have fallen back and difficult to sell at the moment, however in the same areas units fly out the door and there is so much pent up demand, once again its about supply vs demand.

My point is don't compare they are different beasts, look closely at what is happening in a particular area, how quickly they are selling and what is selling and what is not selling.

Cheers
MTR

Hi MTR

I find it interesting that you say there is an oversupply of units and townhouses in Nerang.
I have been looking at houses and townhouses in Nerang and anything decant including townhouses seems to sell almost immediately.
Is it possible that demand on units and townhouses are catching up to the supply? Or do you know of some future developments that are in the pipeline?

Chris

 

[redwing]

Many investors have said they prefer property to shares because of 'control' of the asset.

Control of that asset is obviously higher with a house than a unit/townhouse/apartment (due to body corps etc) also.

Over the long-term, considering Capital Growth and Yield and the fact that investors have made money on both and that the question still comes up, they both do equally well

 

[Mark@Infolio]

Thanks impala67. I'm thinking of Ringwood, Ringwood East, Heathmont. Got reasonably good private/public schools, shopping, transport, lot of new infrastructure etc... So, I think units would do well in these suburbs. I can't see how house prices would drop in these suburbs.

Next suburbs out are Croydon South, Bayswater North. I'm not sure if these will perform as well.

An attractive, single level unit, ideally with it's own street frontage and driveway, preferably one of two or even better on its own title would be an ideal investment in the Ringwood area. They continue to be popular with the growing 'down-sizer' market and many buyers are being pushed further East as the Blackburn/Mitcham markets have risen too high for many of these buyers. Securing one walking distance to either Eastland or Ringwood Nth shopping centre would be ideal. The upgrading of the train station and Eastland is only going to help the already good growth that Ringwood has had and attract new buyers to the area.

Croydon Sth & Bayswater North will be good investments too but you would be buying houses with larger blocks and looking at potential development opportunities down the track. It's two different strategies so it really depends on your individual goals and what your looking to achieve from the investment.

 

[MTR]

Hi MTR

I find it interesting that you say there is an oversupply of units and townhouses in Nerang.
I have been looking at houses and townhouses in Nerang and anything decant including townhouses seems to sell almost immediately.
Is it possible that demand on units and townhouses are catching up to the supply? Or do you know of some future developments that are in the pipeline?

Chris

This is purely feedback by the real estate agent they monitor the stats and they have said there is an oversupply, things can change but I would not expect that quickly. LJ Hooker, Nerang, Chris can provide you with update sales, time on the market all the details required to work out what this market is doing. By the way they are brilliant property managers and selling/buying agents, integrity by the bucket load