The Australian dream is dead; long live the Australian dream. Once upon a time all any home hunter wanted was the house on the tree-lined street with the red door and enough rooms for their 2.5 children; but times have changed. With the shift in attitudes to what constitutes the Australian dream has come a shift in real estate tastes – particularly with investment property.
“There are many reasons why they can actually prove to be better investments than units”
While they tend to be more sporadic than housing approvals, units being green-lit in Victoria has skyrocketed in recent years, and the Housing Industry Association thinks this reflects a change in attitudes towards property.
“Changing consumer preferences, demography, affordability challenges and aspects of the policy environment are all contributing to the current situation where a larger share of new homes are in the form of attached dwellings,” stated HIA Economist Geordan Murray in a March 3 press release.
Despite this trend, the house is hardly a type of property in decline. Approvals are still healthy, and there are many reasons why they can actually prove to be better investments than units.
It’s easier to conduct a high-quality renovation
When you purchase a unit or an apartment as an investment property, it can be much harder to add value with renovations. You may be subject to the laws of strata title, or just find it impossible to get the right approvals due to the impact on nearby properties and their owners.
What kind of renovations could you implement in an investment property?
What kind of renovations could you implement in an investment property?
With a detached house, however, you may find it much easier to conduct significant alterations. Consumer Affairs Victoria still notes that it’s likely you will need the consent of the Victorian Building Authority and local council, but as you own the land and the house, you might find this process much easier.
It’s a great way to fast-track a property investment, which is especially useful for homes in areas that aren’t likely to have strong capital gains.
Demand is on the up for these homes
In an August 21 article, Real Estate Institute of Victoria CEO Enzo Raimondo noted that large family homes were a hot ticket. Sale volumes for five-bedroom homes in middle-ring suburbs went up 25 per cent over the year to June, and 20 per cent during the same period in Melbourne’s outer regions.
Even in the middle of the city, large houses are experiencing huge growth. Five-bedroom homes in Brighton, for example, went up in value by 24.7 per cent in the year to June. Clearly, making an investment in a family house is still a sound way forward for those looking to generate wealth.
But are they better than units?
The monthly values issued by CoreLogic RP Data show that capital gains have been much stronger for Melbourne houses than for units in the 12 months to the end of September. But when capital gains move back to a sustainable rate (as they are likely to do in the next few years), will they remain feasible investment pieces?
“People might have to start taking their investment property’s value into their own hands”
Without capital gains to rely on, people might have to start taking their investment property’s value into their own hands. This is where a high-quality renovation can work wonders. Adding a bedroom or fixing up a kitchen might set you back in the short-term, but the amount it adds to the bottom line in a real estate transaction could exceed this.
Whether a house is a better investment is going to depend on your capability to add value, and demand in your area. A team of professionals should be able to gauge the landscape and determine if a house or unit is going to generate better returns.
If you want to conduct extensive renovations, however, a house might be the way to go. The relative freedom to alter and renovate could be truly great.