House or Apartment? Four Factors to Consider Before Buying your First Home

The choice faced by a lot of first-home buyers is whether to choose a house or an apartment. But the decision over what to choose is usually about location and budget.

In most locations, apartments are much more affordable than houses, but prices differ across cities. Your funds may be enough to buy a three-bedroom house in certain suburbs, but in others your money may only be enough for a small, one-bedroom apartment.

Price and location
The first step in the process is setting your budget by talking to a lender or broker. The type of property that your budget can buy will be determined during this time.

Experts suggest making a list of your requirements, wants and non-negotiables in your dream house, reducing time wasted looking at wrong properties. By making these two steps you will determine which locations have properties within your budget, and suburbs available if you prefer an apartment.

Properties that are nearer the city centre are more expensive as the closeness to high-paying employment is an important factor that influences prices.

Apartments are usually located in inner-ring suburbs, close to train lines or near shopping centres, while outer suburbs are more likely to offer houses that are affordable for first-home buyers.

Other major factors for first-home buyers are access to lifestyle attractions and employment.

If an apartment in a better location than a house is within your budget, it is certainly worth considering. If a large house and yard is not a requirement for you, you’d be better off purchasing in a well-located apartment because of a solid price growth in popular areas.

Banks occasionally have more stringent lending rules for apartments in high-density locations, with some of them actually blacklisting certain suburbs where they have either lent too much or they feel the suburbs are going to experience a glut in apartments.

Practicalities and planning
It is the responsibility of the owners of houses to maintain the building, gardens and lawns on the block. Time-poor buyers are suited to apartments as the maintenance of the common property falls on the owners corporations.

For houses, the council rates and insurance are normally higher, and the heating and cooling bills are more expensive. In comparison, the strata fees for apartments pay for the management of the complex, including shared facilities like pools or gyms.

There is the issue of privacy and noise for apartment dwellers due to the proximity to neighbours. Houses, though, are more suitable for young families, who quickly outgrow apartments.

People tend to stay a little longer in houses compared to townhomes or apartments.

Land and development
The primary advantage of being a homeowner is the land where it stands on, as land increases in value as the population grows.

On the other hand, buildings devalue due to wear and tear, and require constant maintenance or replacement.

The possibilities for a house are greater via renovations, extensions or a rebuild as these can boost the value of the property. Apartment owners share in the land where the complex is built, and extensions or rebuilds are impossible, but cosmetic renovations can be done.

In-between options
Both size and affordability can be achieved with a townhouse, duplex or villa. Commonly joined to one or more sides and sometimes strata titled, these alternatives are less expensive than stand-alone houses.

Townhouses are looked at more favourably than units by lenders.

There are townhouses that actually give you your own chunk of lot and while they come with strata fees, they are not as high as apartment units.