Should I Invest in a House, Townhouse or Unit in Brisbane?
The Australian dream of owning a large house on a quarter-acre block is being challenged by buyers who favour a low maintenance lifestyle, closer to amenities and employment. As buyer’s agents, we are commonly asked: Should I invest in a house, townhouse or unit in Brisbane? Depending on a client’s investment strategy and goals, there are advantages to all three types of property.
The main advantage of investing in a house (compared to a unit or townhouse) is being able to capitalise on the larger land component. After all, land values tend to increase over time, while the building and any structural elements tend to depreciate. Larger block sizes allow investors the opportunity to renovate, extend or re-build. For some house purchases, there may also be the option to subdivide or re-develop the block. For these reasons houses will generally out-perform units and townhouses in a similar location.
Houses also have the advantage of being freehold property (ie are generally not part of a body corporate). This gives investors greater flexibility to make changes or improvements to the lot, and save them the fees and conflicts which can occur within a body corporate.
The main disadvantage of buying a house is the high purchase cost (compared to buying a townhouse or unit). This could mean that investors are forced to buy in a less desirable area than they could otherwise afford. The rental return for houses also tends to be lower, resulting in higher out-of pocket expenses for investors. Owning a house also brings greater responsibility, including having to maintain and insure the dwelling and yard.
Purchasing a townhouse in Brisbane can be a good alternative for investors looking to achieve a balance between capital growth and rental yield, and purchase in a desirable area.
The majority of Brisbane townhouses are strata-titled and form part of a body corporate. Body corporate fees are payable by each lot owner to cover the costs of building maintenance and administration. Owners (and tenants) must adhere to body corporate by-laws including restrictions relating to noise, pets, and improvements to the property. Read more about buying into a Body Corporate in Brisbane here.
A small proportion of Brisbane townhouses are freehold (so not part of a body corporate). They may be freestanding or share common walls. They usually sit on very small/low maintenance blocks and each owner is responsible for the maintenance of their own property.
In general, townhouse complexes are located close to amenities such as shops, transport, schools and employment centres, making then desirable for tenants and owner-occupiers.
Compared to houses, townhouses tend to have much smaller floor plans, and very limited scope for extension or re-development. Due to the proximity of other buildings and shared walls, noise can sometimes be an issue.
Purchasing a unit can be a good option for investors with limited funds. Units are considerably more affordable than houses and townhouses, and often achieve higher rental returns. Units require very little owner input, with the Body Corporate being responsible for building maintenance and administration. For these reason units can be an excellent “set-and-forget’ type of investment.
Like townhouses, units are usually located close to major employment centres and other amenities.
Large unit complexes often have facilities such as pools, gyms and elevators that contribute to high body corporate fees. By-laws limit what residents can and can’t do with their property, including noise restrictions, pet policies, and regulations relating to renovations and improvements.
In recent years, Brisbane has seen an over-supply of units particularly in the CBD and adjacent suburbs including Fortitude Valley, South Brisbane, West End and Woolloongabba. This has significantly impacted capital growth, and we have seen modest declines in unit prices over recent years. Some lenders are now refusing to loan money for unit purchases in some postcodes. Other lenders require higher deposits.
Whether to invest in a house, townhouse or unit in Brisbane is an individual decision. Each asset type has the potential to perform well, provided they are well located, thoroughly researched, and purchased at the right price. The best type of property needs to be based on the goals and strategy of each individual, their budget, and the supply and demand characteristics of the area. Need more information or assistance with your property search? An independent buyers agent can help – feel free to contact us.