Property investment options beyond houses
December 16, 2013 / Written by Rich Harvey
It's no secret that property investors in the Sydney area are reaping the rewards of value growth and high demand.
The most recent RP Data - Rismark International Home Value Index results, released on December 2, showed that Sydney experienced 12.5 per cent of annual growth as of November.
Meanwhile, Australian Property Monitors (APM) echoed these results in its annual state of the market report on December 5.
"The Sydney housing market recorded strong levels of buyer activity through 2013 with record levels of buyer and seller activity reported during the spring home auction season," the report stated.
"Sydney's median house price has increased by over 10 percent in 2013 to record-high levels now well over $700,000."
And while huge value gains in the residential house market are receiving well-deserved attention, it's important for a potential property buyer to understand they have more options than traditional houses.
Apartments and townhouses are seeing high growth as well, even outperforming houses in some suburbs.
APM reported that the median price for a unit in Sydney rose above $500,000 for the first time ever during 2013.
Other benefits of units
Units also come with their own unique advantages. For instance, when compared to houses, units such as apartments and townhouses are much easier to maintain and manage.
For investors who have limited time and resources to devote to their property, this can be a huge help.
Additionally, for those looking to rent out their property to tenants, RP Data reported that rental yields have historically been higher for units when compared to houses.
Finally, purchasing property can be an expensive investment endeavour, and units can be more affordable than houses depending on the area.
On the downside, investors need to watch the cost of strata fees and make sure these are not excessive. Strata fees are paid quarterly and help the investor to put aside money for maintenance and repairs.
Houses tend to have much larger maintenance costs and the cost of land tax can also be a major imposition on total returns. There is no hard and fast rule which says houses or units are better. It all comes down to the investor doing adequate research on an area and pinpointing the specific property types that suit the local area.
Picking the right type of property and paying the right price means you protect yourself from buying an asset that is difficult to sell in the future. While land content is important, position and proximity are equally important when it comes to creating the maximum capital growth and rental return.