Episode Details

What's a better investment in today's market - apartments or houses? That's the topic of today's show.

Now I could give you a simple answer, but I thought it was better to help you understand the thought process behind my decision than give you an immediate answer. Of course, I'll also be sharing my mindset message for today before the end of the show.

So is it better to invest in a house or an apartment?

The change to a new working and home life prompted by the COVID-19 pandemic, combined with a loss of confidence thanks to some shoddy high-rise apartment buildings during the last building boom has seen investors increasingly shy away from investing in apartments.

It seems that more investors are now asking if apartments are still a good investment in the current market.

Well… my response is… it depends.

I remember times when apartments outperformed houses, but for the last decade or so house values have risen at more than twice the rate of units.

And the current property boom widened what was already a sizeable difference in prices.

Of course, historically apartments have been cheaper than houses but the gap in prices has grown particularly wide in the past year.

Some apartments, especially family-friendly low-rise apartments in lifestyle neighborhoods have still performed well and are likely to remain in continuous strong demand.

The Numbers of Apartment Living

The 2016 Census of Population and Housing found that 10% (2,348,434) of all people in Australia spent Census night in an apartment.

This meant that there was around one occupied apartment for every five occupied houses in Australia - compared with one to every seven, back in 1991.

While the number of vacant rental listings has fallen significantly in Brisbane, Darwin, Perth, Adelaide, and Hobart over the past year, Sydney and Melbourne continue to bear the brunt of closed international borders that has left many inner-city apartments without tenants.

Data from Domain showed Melbourne's vacancy rate sat at 4.7 percent as of February 2021 — a massive spike from the same time last year when the vacancy rate was 1.6 percent.

Choosing the right neighborhood

Sure, last year offices were shut and lockdowns were in place but moving forward more of us are likely to continue working flexible rosters and working at home more than ever.

This means gone are the days where our 'home' was simply the place we rest our heads and enjoy some downtime between work and our social lives – the coronavirus crisis has put an end to life as we once knew it.

If you can leave your home and be in short 20-minute proximity – whether that is on public transport, bike ride or walk - to a great shopping strip, your favorite coffee shop, amenities, the beach, a great park, that's the new gold standard of where people want to live.

What matters in a home?

And it's not just the importance of neighborhood that has shifted Australians' views.

The legacy of the lockdowns and the work-from-home-movement have made many Australians reevaluate what exactly they want in the home itself.

All of a sudden people were trying to find space to be able to work, study, and also relax all under one roof - and in many cases, this hasn't gone well.

Prior to COVID-19 more Australians were trading space for place and were embracing apartment living, trading their backyards for balconies and courtyards in inner-city locations. Now we want more space – a zoom room, a bigger yard, and a garage that can be converted to a gym.

High rise apartments: The slums of the future

It's worth pointing out that while large well-located suburban medium-density apartments will make great investments increased substantially in value over the long term, many of the high-rise towers built in the last fifteen years will continue to underperform with poor, if any, capita