Apartments going out of favour


This week on Real Estate Talk Michael Yardney discusses a common question – which makes a better investment: a house with land or an apartment?

Here’s the transcript:

Kevin:  For generations, backyards, barbeques, and big houses have been the norm for Australian homeowners, but what of the future generations? I heard an absolutely ridiculous statement the other day where someone said that as Australians, we no longer have a love affair with apartments or units. I think it’s quite the opposite.
I don’t know how you feel about this. Michael Yardney joins me. What do you think, Michael?

Michael:  Hi Kevin. There’s always going to be people who want to live in houses with front and back yards, but more and more people are choosing to swap their back yards for balconies. So I agree with you: that commentary you said a moment ago probably isn’t right.

Kevin:  Is it affordability, Michael?

Michael:  It’s a combination of affordability and also lifestyle. In Australia, over the next 15 years, it’s proposed that we’re going to have another 2.3 million households. Where are they all going to fit?

And you’re right: we can’t all afford to have the big yards for that sort of location.I think nowadays, we’re trading back yards for balconies – as I said – because we want to be close to where the action is, close to where amenities are.

Kevin:  We used to see those apartment blocks and townhouse blocks as almost being like slums, but they’ve totally changed the landscape, haven’t they?

Michael:  Very much so. When I grew up, they were called flats, not apartments, and that’s where the poor people, those who couldn’t afford to buy homes, would live.

But nowadays, they’re the preferred style of accommodation, considering that more than 50% of our households are one- and two-people households, so they don’t need all those rooms and they don’t need all that space.

I think the other thing is how we live, also. Many of us now entertain outside rather than at home.

I know you in Queensland have your beautiful Queenslander porches, but in the big capital cities, more of us are tending to live in a different sort of lifestyle where you go out and entertain at restaurants.

We even have business meetings around the corner at restaurants and cafés.

Kevin:  What are some of the lessons for investors in all this, Michael?

Michael:  I guess the lesson is you’ve got to own a property that’s going to be in continuous strong demand in the future by a wide demographic: owner/occupiers, because they’re the ones that are going to push up the values, but tenants also, because they’re going to help you pay your mortgage.

While in the past, this clearly was houses, now significant changes in our population profile and our lifestyle priorities are feeding a strong growth in apartment living, and it’s changing the pattern of growth in properties, and in particular, in well-located areas, apartments do make good investments.

Kevin:  Any particular apartment blocks that you would steer clear of?

Michael:  I think there always should be an element of specialty, of scarcity, so I wouldn’t be buying properties as an investment in the big high-rise multistory ones where there’s always going to be challenges getting out of the car park in the morning when everyone wants to get out, or getting the lifts in the morning, the body corporate meetings with lots of other people.

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I’d be looking for smaller, maybe more boutique blocks.

I like the older ones, because they seem to have better floor plans, better layouts, and are more solid.

They’re the sort of things I’d be looking at, even if they’re a bit old because you can do them up, you can renovate them, and you can add some value, Kevin.

Kevin:  Very good words of advice. Michael Yardney from Metropole Property Strategies. Thanks, Michael.

Michael:  My pleasure, Kevin.


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