Should I buy a house or an apartment?

With housing affordability continuing to decline, many first home buyers have begun considering alternatives to buying a traditional family home.

As a direct consequence of rising property prices, many affordable homes have been pushed out to metropolitan fringe suburbs, which creates a secondary challenge for first home buyers — travel time to and from work.

As a result, some first home buyers are weighing up apartment living. And why not? Shorter travel times, proximity to family and friends and less property maintenance are just some of the benefits. Given that many apartments are well served by public transport, some buyers also save by not owning a car as they have little need for one.

In many countries it is perfectly normal for families to live in apartments. There are entire cities in Asia and Europe that only offer apartment living.

Although tempting to head down this path in Australia, buyers need to look beyond the justifications I’ve just mentioned. Indeed, a key consideration for first home buyers is long term growth potential, especially when viewing the family home, along with superannuation, as a store of wealth.

Recent research by InvestorKit looked at the difference in annual growth between houses and apartments across the same Australian suburbs.

Paramatta in Sydney topped the list for having the greatest gap between house and apartment price growth over a decade. Apartments saw only a 2% increase in value while houses saw a 76% increase.

In Ryde and Hunters Hill in NSW, apartments faired better rising by 17% in value while houses grew by 89%.

This trend has consistently played out across the Australian residential property market over time — houses simply deliver better long term growth. While it’s natural to seek out alternatives to buying a traditional family home (due to affordability and other constraints), make sure to factor long term growth into your property buying decision.

Given the foregoing, at Real Estate Capital we’re focused on helping first home buyers looking to purchase family homes. So if you’re an aspiring first home buyer that meets our criteria, be sure to registered your interest here.