Townhouse vs house vs apartment: which is a better investment?

Home ownership is changing in Australia, with many buyers moving away from the traditional house and instead becoming open to purchasing dwellings of different shapes and sizes.

Depending on what you are looking for in a home, one of these types of properties may be more suitable than the traditional house with a front and back yard.

Townhouses cost less than a house, and so buying one could be a better option if you want to live close to the CBD. Picture: realestate.com.au/buy

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Costs of transacting property in Australia is high, mainly due to stamp duty and other selling costs, so from an investment perspective buyers should avoid doing so more than necessary. For this reason they should spend ample time considering their needs before buying a home.

Different property types

These days when searching for property there are a number of options to select from:

There’s an array of choices to pick from when selecting a property type. Picture: realestate.com.au

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House

This is the traditional stand-alone dwelling where the buyer is purchasing the land on an individual title.

Houses come in all shapes and sizes to suit singles, couples, families and even multi-generational families. It is also the most common property for Australian owner-occupiers. This type of house allows more privacy and flexibility. However, it has its drawbacks, including: higher costs, more space to clean and maintain, higher utility bills, and sole responsibility for maintenance and repairs.

Pros

More space:

• houses have minimum block sizes set by the government and the dwellings tend to be larger than other dwellings.Outdoor space:
• most houses come with a front or back garden, or both.Privacy:
• houses offer greater privacy, as you are not sharing common areas with multiple people.Flexibility:
• a shared title often brings rules, especially when it comes to renovations. On a single title, you are free to do what you like, permitting council regulations.Better finance:
• lenders prefer freeholds and will likely lend you more money when purchasing a house.Resale value:
• in general, houses appreciate better than townhouse and apartments.Although they’re more expensive, houses also offer greater resale value as they tend to enjoy more capital growth. Picture: realestate.com.au/buy

Cons

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Cost:

• houses tend to be more expensive than other types of property in the same area.Location:
• in popular locations, houses are either more expensive or snapped up by developers.Maintenance:
• keeping a house in good nick is a lot of work. There is cleaning, gardening, plumbing and a whole range of other tasks – not to mention repairs.Bigger bills:
• houses are generally harder to heat and cool, which means larger utility bills. You must also take out insurance by yourself, which means bigger premiums.Apartment

An apartment is a self-contained flat that is part of a bigger complex.

Apartments can be a popular choice for singles or couples, as well as downsizers, given their smaller size and lower maintenance requirement.

When you own a unit, you are on a strata title, which means the flat belongs to you but ownership of the common property is shared with the different owners.

It also means that you will belong to a body corporate and must comply with certain bylaws. You will be required to pay a fee to the body corporate to maintain and repair the common spaces. Body corporates are responsible for maintaining and repairing the common areas.

A cheaper purchase price and more convenient location tend to be the biggest benefits of owning an apartment, which means they’re generally best suited to property investors and single, first home owners.Pros

Affordability:

apartments are generally more affordable than stand-alone houses.

• Location: Apartment complexes are often built next to popular amenities such as transport and shopping strips.
• Less maintenance: the body corporate repairs and maintains the common areas.
• Security: new apartments tend to have swipe cards and CCTV, and having more people around is generally a plus.
• Amenities: units can come with added extras such as gyms, pools, lifts and tennis courts.
• Lower bills: living in a unit will cost you less when it comes to water, heating and gas.
• Apartment buildings often come with modern amenities such as gyms, saunas and cafes. Picture: realestate.com.au/buyCons

Less space:

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flats are usually smaller and many have limited or no outdoor space.

• Body corporate fees: these can be cheap in older apartments but can become quite expensive if your complex has lots of amenities.
• Reduced flexibility: bylaws stipulate whether you can have pets, allowable noise levels, where you can hang your washing, and whether you can renovate.
• Fewer parking spaces: there is increased competition for car spaces around high-rises and an individual space on your title can be costly.
• TownhouseA townhouse is a multi-level building designed to mimic a traditional house that is owned on a strata title. This means you own the dwelling but share the land with other people.

Townhouses are a fantastic option for singles, couples, families or downsizers, given they often have a similar amount of space as a house but have substantially fewer maintenance requirements.

They will usually come with some outdoor space, which can range from a courtyard or a larger backyard.

Depending on the individual townhouse, they may have a body corporate and, therefore, face similar restrictions to an apartment.

Pros

Space:

townhouses are often two or three-storeys and have more room than an apartment.

• Modern amenities: due to the recent boom in townhouse construction many of these dwellings have modern conveniences like ensuites and open-plan floorplans.
• Privacy: designed in a similar way to a house, townhouses don’t have any shared areas.
• Limited freedom: you are still bound by bylaws, but these tend to be more relaxed than apartment complexes.
• Price: townhouses are cheaper than houses.
• Location: buying a townhouse closer to the city or beach, or in a competitive real estate market is more affordable than buying a house.
• Often part of a major development, one townhouse tends to be very similar to the next. Picture: realestate.com.au/buyCons

Space:

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less area than a house.

• Price: more expensive than an apartment.
• Shared title: you are on a strata scheme.
• No individuality: townhouses are often the same layout and design as the neighbouring buildings and tend to lack individuality.
• Privacy: you have less private space than in a house and typically share walls with your neighbours.
• Land: smaller lot size.
• Stairs: townhouses typically span two to three storeys, which may not be suitable for elderly or disabled owners.
• Resale value: townhouses usually experience less capital growth than a house, roughly the same as an apartment.
• Subdivided blocksA subdivided block which may include either a standalone house or an attached dwelling is considered a unit due to the division of the land. The street numbers are usually accompanied by a letter or number. 1/29 or 42B.

Subdivided blocks are a fantastic option for families, couples or downsizers who wish to capitalise on the option to buy a house in an area where full blocks are out of their price range.

Technically all urban and suburban blocks are divisions of larger parcels of land that have been split up and arranged into the streets and suburbs we know today. Subdivided blocks are smaller than the average block in an area, especially those close to CBDs. This allows more buyers access land. For example, it used to be common for blocks of land in Australian suburbs to be around a quarter of an acre or 1101sqm.

Blocks in many urban areas are trending smaller, especially those close to CBDs, but usually the suburb will have a standard size that is common for most dwellings.

Subdivided blocks will be smaller than the average block in the area, hence the more affordable price, which allows more buyers to access land.

Often these properties can share driveways, parking areas or other outdoor space and may or may not be subject to an owners corporation.

This option can be popular for those that are looking for all the benefits of a house but don’t have the budget or desire for a full block in the same neighbourhood.

Pros

Price

: Subdivisions will be cheaper than full blocks in the same area.

• Dwelling type: Many subdivisions have traditional free-standing family homes with all the individuality and space that comes with them.
• Ability to make changes: Owners can make changes to their dwellings as they would a standalone house provided it’s not part of the shared or common space, unlike owners of a strata title.
• Outdoor space: Subdivisions will often either have a front yard or a back yard or smaller versions of both, depending on where the house is situated on the block.
• ConsPrivacy:

Some dwellings on subdivided blocks may be built close together and therefore privacy can be impacted. These units are more expensive than the townhouses located in similar areas.

• The value of the property will be lower than if it were a whole block. Things to consider before deciding on a property type
• When choosing between a house, subdivision, townhouse or apartment, there are a few factors to think about when it comes to making an investment:What can you afford?
• How big is your family?Will you need to upsize or downsize in the future, therefore spending more on transaction costs?
• Do you have pets that require outdoor space?Do you want to entertain outside?

Is a garage essential?

Would you like to renovate?

• Do you like living close to your neighbours?
• Do you mind sharing facilities?
• Do you know what a strata scheme is and is it something you’d be willing to deal with?
• Do you mind paying body corporate fees?
• Do you want to own physical land?
• Will you be a owner-occupier forever, or might you rent out the property?
• For investors: Will renters find this type of property appealing?
• How to choose between different housing types
• When it comes to buying a home, it’s important that you consider potential downfalls and bonuses of all types of property and choose the one that is right for you.
• This includes whether your family will grow and if you will need more space in the future. Meanwhile, if it is an investment property, location might be more important than the size of the property.
• Answering some of these questions before you buy should help you decide which property type is best for you, reducing the likelihood of making a costly mistake.
• A house offers much more privacy than an apartment or townhouse, but it also comes with a hefty price tag. Picture: realestate.com.au/buy
• This article was originally published on
  9am, 5 April 2023
  The information has been updated regularly to ensure that it is current.