House or apartment: which one should you buy?

If you’re ready to enter the property market but are still deciding whether to buy a house or an apartment, then this guide is for you. We’ll expand on the unique benefits and challenges as well as some of the parameters to keep in mind so you can make a smart and informed choice about your purchase.

Pros and cons of buying an apartment

Advantages

  • Apartments are often more affordable than houses, making them a great option for first home buyers and those on a tight budget.

  • With an apartment, you won’t have to make arrangements for roof repairs, lawn mows and any major structural issues. The building management will look after maintenance and upkeep.

  • Some apartment complexes offer amenities like gyms, pools, and security services which can be hard to get with a house and can help you save in other aspects of your life.

  • Apartments are typically situated in city centres, offering convenient access to work, entertainment and public transport. If convenience tops your list of must-haves, an apartment may work well.

Disadvantages

  • Apartments usually come with limited space, which can feel restrictive from time-to-time, especially if you have a growing family or simply need more room.

  • You will avoid direct maintenance costs; however, you’ll need to pay strata fees (also known as body corporate or homeowner association fees) to cover the shared building expenses. These can add up over time.

  • As part of a shared building, there could be restrictions when it comes to renovations, or even things like what colour you could paint your front door.

  • Apartments can appreciate in value, however this may not grow as quickly as houses, especially in areas where land is the key driver of property value.

Pros and cons of buying a house

Advantages

  • You’re likely to have more room, both indoors and outdoors with a house. If you’re looking for yard space for a pet, a home office, or simply more room for a growing family, a house may be a better fit.

  • You’ll own the land the house sits on, which can significantly increase its long-term value.

  • You have full control over renovations, landscaping and the overall look of your property. Remember to keep in mind that your property might be subject to heritage guidelines, covenants or overlays that might restrict what you can and cannot do.

  • While maintenance is entirely your responsibility, you won’t have to deal with the ongoing fees to a building management company.

  • Houses are much more likely to appreciate quickly compared to apartments, especially where land is scarce. Appreciation is likely to help you build equity too to help with potential future property purchases.

Disadvantages

  • You’ll need to factor in higher upfront and ongoing costs. With a house you’ll need a larger deposit, will likely need a larger mortgage and will have higher repayment costs compared to buying an apartment.

  • Looking after all repairs, renovations, upkeep and ongoing costs like council fees can prove costly and time-consuming, especially if you’re on a tight budget.

  • Houses may be in suburban or less central areas, which may translate to longer commutes for work and entertainment, and fewer amenities generally, within walking distance.

  • Given the higher expense, buying a house can be more challenging, for example for people on a single income, with dependants and/or lower borrowing power.

  • Houses are typically more at risk of damage due to unforeseen events such as natural disasters which often translates to higher ongoing insurance premiums.

How to decide

Choosing a house or an apartment isn’t simply a decision about cost – it’s also about your lifestyle, finances and long-term goals. As a first home buyer, irrespective of the type of property you choose, you may be eligible for government schemes and grants alongside stamp duty savings to help with your purchase. Here are a few things to keep in mind when deciding:

Budget

  • Figure out your deposit savings, borrowing power, ongoing income potential and what your monthly mortgage repayments might look like. 
  • Have you considered additional costs like maintenance, strata fees or property taxes?

Lifestyle

  • Consider your needs and priorities – do you prefer city living with access to restaurants and public transport within walking distance, or do you enjoy the quiet of suburban spaces?
  • Do you need extra space for kids, pets or hobbies?

Investment potential

  • Is this your home to live in for the long-term, or is this a stepping stone to a larger property?
  • Which type of property has a higher appreciation potential? For instance, houses generally have a higher appreciation potential, however, apartments in high-demand areas can also be an excellent investment.

Maintenance and commitment

  • If you’re leaning towards a house, are you prepared to commit to the ongoing expenses it requires?
  • Do you prefer an apartment because of the overall convenience of maintenance and the fact that most of the upkeep is handled for you?

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Terms and Conditions

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.

Target Market Determinations for these products are available at nab.com.au/TMD.