Are Apartments really bad?

Jan 22, 2024

Introduction

In the ever-evolving landscape of real estate investment in Australia, the debate between purchasing houses with land and opting for apartments or units has become a topic of considerable discussion. While the prevailing wisdom often suggests favoring houses for their land size, the reality, especially in Sydney, presents a complex scenario that goes beyond mere acreage. In this blog post, we'll explore the nuances of this dilemma and shed light on the importance of land value over sheer size.

Commute vs Cost

The Australian property market, particularly in Sydney, has witnessed a surge in articles advising against investing in apartments or unit blocks. The general sentiment leans towards prioritizing houses with substantial land. However, this advice can sometimes translate into compromising on commute time or making exorbitant investments in sought-after locations.

In Sydney, the trade-off often involves either purchasing a house hours away from the city to secure ample land or paying a premium for a house in a desired location. The result? Limited financial flexibility for future investments due to hefty mortgage commitments that span decades.

apartment interior

The Land Value Paradigm

In navigating the housing market, it's crucial to distinguish between land size and land value. While a vast expanse of land can be appealing, the emphasis should also be on the inherent value of the land. This distinction opens up the possibility of considering alternative options, such as older apartments or units within boutique complexes in sort after locations.

The case for apartments

Contrary to the prevailing narrative, not all apartments are created equal. Older units that have withstood the test of time, especially within smaller boutique complexes with fewer units, present a unique proposition. Here, the focus shifts to the concept of land value per unit entitlement—a metric that can unlock the potential for value-driven investments.

Winning with Boutique Complexes

Choosing an apartment in a smaller, well-maintained complex can offer the best of both worlds: desirable location and reasonable pricing. The lower number of units translates to a higher land value per unit entitlement, providing a more cost-effective entry into prime locations without compromising your financial freedom.

Building for the Future

Buying an apartment with a favorable land value per unit entitlement not only secures your spot in a sought-after location but also frees up capital for additional investments. With reduced mortgage burdens, you gain the flexibility to channel spare cash into income-generating opportunities, paving the way for a more robust and diversified investment portfolio.

Conclusion

In the dynamic real estate landscape of Australia, it's essential to move beyond conventional wisdom and consider the nuances of land value. The choice between houses and apartments need not be a binary one; instead, a strategic approach focusing on land value can open doors to prime locations without compromising financial flexibility. So, the next time you're contemplating your real estate investment, think not only in terms of size but in terms of the value that land brings to your investment portfolio.