No matter whether you’re a first home buyer or a baby boomer looking to downsize, apartments can offer an affordable, low maintenance lifestyle. Just be sure to consider the possible pitfalls before signing up for unit/apartment living.
The latest figures from research group RP Data show that in the financial year ended 2013, capital city home values rose 3.8%, pushing the median house value up to $520,000.
Apartments generally offer a more affordable option, with a national median price of $440,000. This affordability gap is considerably more marked in some cities. In Sydney for instance, the median house price is now $662,500 – well above the median unit price of $500,000.
For investors, units offer the additional appeal of strong rental yields. Nationally, landlords are securing yields of around 4.9% on apartments compared to 4.2% on houses.
Along with the benefits, units can offer some drawbacks and Archicentre, the building advisory service of the Australian Institute of Architects, has issued some guidelines to consider especially if you’re thinking about buying an older apartment.
A first step is to check the condition of the overall building. Many of the same faults found in older homes like rising damp, leaking plumbing, dodgy electrical wiring and structural cracking can also be found in units, especially in older buildings.
This is important because when you purchase a unit, you not only assume financial responsibility for your own unit, you also have a stake in common areas like car parks, basements, lifts, lobbies and recreation areas, and the building itself.
If for example, cracks started to appear in a ground floor apartment, owners of units throughout the building, on every floor, would be required to contribute to the repairs. If there was not enough money in the strata fund to cover the repairs, all owners would be levied a charge to boost the kitty sufficiently – and those extra levies, if required, can run into thousands. That’s how it works under strata ownership.
This highlights the importance of organising a pre-purchase building and pest report on any apartment you plan to buy. It usually costs upwards of around $500 but it’s a worthwhile investment that could spare you a nasty financial shock later on.
I also highly recommend getting a strata report. This will details things like major repairs completed on the building in the past, the likelihood of any upcoming major building works and any issues that have arisen between residents. These reports also cost a few hundred dollars and your solicitor or conveyancer should be able to put you in touch with a firm that can provide a report, or just Google ‘strata report’.
Be aware too that there can be limited opportunities to add value to an apartment through renovations.
Unlike a house, any significant changes made to an apartment may be tightly controlled under Strata Corporation guidelines. It can also be difficult relocating interior services like water outlets due to the communal link of services such as plumbing and wiring.
On top of this, improvements need to be carried out without damage or disruption to the walls, floor or ceiling that you share with neighbours. This being the case, any renovations may be limited to cosmetic changes.
If you’re comfortable with these limitations, apartment living can offer a quality lifestyle. Choose a suburb with decent growth potential and your apartment can also be a source of long term capital gains.