Which of these 3 property types will provide the best long-term gains?

One of the most common questions we hear from buyers at PropCulture is, "Which property type is going to make me the most money?" Easy question, but the answer isn't always straightforward. Various factors, including market conditions, location, personal circumstances and goals, all play a significant role in determining the best investment for you.

However for the sake of simplicity, let’s break the options down into three residential categories: houses, townhouses, and apartments (12+ units in a block).

Houses: The Classic Choice, one your parents will be proud of.

Pros:

1. Capital Growth: Houses typically offer the strongest capital growth potential over time. The value of land tends to appreciate, especially within desirable locations.

2. Renovation Potential: With a house, you have the freedom to renovate, extend, or even rebuild, which can significantly increase the property’s value and customisation to your needs.

3. Longer term liveability: Houses generally come with enough space and privacy to offer buyers potential for long term enjoyment and liveability. Allowing owners to stay longer in their home and avoid transaction costs moving from one property to another seeking more suitable accommodation.

Cons:

1. Higher Entry Cost: Houses usually come with a higher purchase price and additional costs such as maintenance and property taxes.

2. Maintenance Responsibilities: Homeowners are responsible for all upkeep, including landscaping, structural repairs, and utilities.

3. Market Sensitivity: Houses can be more sensitive to market fluctuations, particularly in less stable economic times.

Best for: Long-term investors who are looking for substantial capital growth and have the means to maintain and potentially improve the property.

Townhouses: The Middle Ground

Pros:

1. Affordability: Townhouses are generally more affordable than standalone houses, making them accessible to a broader range of investors.

2. Low Maintenance: Often part of a community or strata title, townhouses come with shared maintenance responsibilities, reducing individual upkeep costs.

3. Rental Demand: Townhouses appeal to a wide range of renters, including families and young professionals, due to their blend of space and affordability.

Cons:

1. Strata Fees: These can add up over time and impact the overall return on investment.

2. Limited Customisation: There are usually restrictions on the extent to which you can modify or renovate a townhouse.

3. Capital Growth: While generally good, it may not be as high as that of standalone houses, especially in certain markets.

Best for: Investors seeking a balance between affordability and potential for capital growth, who prefer lower maintenance responsibilities.

Apartments (under 30 Units in a Block): Urban Appeal

Pros:

1. Affordability: Apartments are typically the most affordable entry point into the property market.

2. Location: Often located in urban centres, apartments provide easy access to amenities, employment hubs, and public transport, making them highly attractive to renters.

3. Low Maintenance: Maintenance and repairs are managed by the building’s body corporate, easing the burden on individual owners.

Cons:

1. Capital Growth: Apartments may experience slower capital growth compared to houses, particularly in oversupplied markets.

2. Body Corporate Fees: These ongoing fees can be substantial and affect overall profitability.

3. Limited Control: Owners have less control over the building and must adhere to body corporate rules and decisions.

Best for: Investors looking for a low-maintenance property with steady rental income, particularly in high-demand urban areas.

Conclusion: Which is the Better Investment?

The best style of home for investment depends largely on your financial situation, investment goals, and risk tolerance.

Houses offer the potential for significant capital growth and customization but come with higher costs and responsibilities.

Townhouses provide a good mix of affordability and growth potential with manageable maintenance, making them suitable for a range of investors.

Apartments offer affordability and steady rental demand, especially in city centers, but may have slower capital growth and ongoing fees.

Ultimately, a diversified portfolio that includes different property types can balance risk and reward. Each type of property has its own set of advantages and drawbacks, so understanding your personal circumstances and market conditions is crucial. Consulting with a real estate professional can provide tailored advice to help you make the best investment decision.