Apartment buying guide: ‘Happily ever after’: how to nail your next home purchase

The price gap between houses and units has never been greater, but with demand for apartments likely to soar in the next 18 months, savvy buyers need to start making their move.

The price gap between houses and units has never been greater, and as a result, many buyers on tight budgets are setting their sights on apartments.

However, with oversupply in some markets, stories of dodgy building practices and a post-pandemic obsession with space – purchasers need to be selective.

THE GREAT DIVIDE BETWEEN HOUSES AND UNITS

In January, the value divide between houses and units reached an all-time high of 28.3 per cent according to CoreLogic’s monthly Market Update. While units recorded an annual growth rate of 14.3 per cent, house values surged by 24.8 per cent.

Kaytlin Ezzy, CoreLogic research analyst and the report’s author, said despite the great divide, the forecast is for unit demand to return.

The value divide between houses and units is at an all-time high.

“It’s likely affordability constraints will gradually pull some demand away from houses towards more affordable units and with international borders opening this month, Australia may gradually see a return to pre-Covid levels of migration. As most migrants initially rent in Sydney or Melbourne this could help bolster rental demand in those markets hardest hit by the pandemic, which could boost investor demand and ultimately, unit prices.”

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WHAT TO PRIORITISE WHEN BUYING AN APARTMENT

Veronica Morgan, buyer’s agent, podcaster and co-founder of the Homebuyer Academy, said unit buyers shouldn’t just concentrate on the purchase price.

“There’s so much focus on just the acquisition, it’s a bit like the old fashioned rom coms where they only focus on the characters getting married. But what about the happily ever after?”

She offered her two principles for smart apartment buying. “Firstly, if it’s easy to buy it’s going to be hard to sell. If you’re struggling in this tough market, it’s to be understood, but don’t let the simple answer be to just buy something because it’s easy. The problem is, you could get stuck with it.

“My second principle is; you’ve got to always think who your next buyer is going to be when you’re ready to move on.”

Covid had shifted how future buyers and tenants might perceive a property. Picture: David Caird

APARTMENTS TO AVOID BUYING

While units are the likely go-to for penny-pinching purchasers, the wrong kind of apartment could end up costing money.

“While it feels logical to start with a unit, where the danger comes in is if you buy a property you’ll either outgrow too quickly, or isn’t going to grow in value. Many people think buying anything just to get onto the property ladder is the most important thing, but in many cases a unit might not get you on the ladder.”

Ms Morgan said while small is tempting for budget-conscious buyers, Covid had shifted how future buyers and tenants might perceive a property.

“Size is really important. Well-designed units in boutique buildings in locations without lots of units, they can be fine. But the problem in some areas is the sheer volume of stock particularly targeted towards first-time buyers, and investors. These solve the affordability problem but there’s no scarcity of stock.”

IMPORTANCE OF LOCATION WHEN BUYING A UNIT

When researching a potential suburb, Ms Morgan said transport options and lifestyle amenities are important, but stressed oversupply can be a unit buyer’s worst enemy.

“The older 1960s or 1970s three-storey walk ups may not have the sexy modern kitchens and bathrooms, or stamp duty concessions, but the benefit is you’ve got better opportunity for capital growth in areas not suffering from oversupply.”

The co-host of Foxtel’s Location, Location, Location said buyers should be careful to not confuse urban renewal with gentrification.

Location can be crucial.

“Urban renewal is when they knock down a bunch of factories, which tend to be quite big sites and build apartment blocks on them. If you want to be close to the city, you’ve got to be very careful about what you buy and where.”

“Have a look on a map and ask yourself how many opportunities there are for developers to build lots of apartments that are going to compete with your apartment in the future?”

A QUESTION OF QUALITY

Another hurdle for the uninitiated when purchasing new is trusting the quality of a yet-to-be built apartment.

Research by the Strata Community Association NSW in 2021 found almost four in 10 new apartment buildings in the state had serious defects and a report by the Australian Apartment Advocacy revealed 54 per cent of Victorian unit owners reported defects.

“If you’re considering new, then look at boutique developments in areas where new developments are rare. And buy from a developer and builder with a very long and transparent track record you can easily check – and only then should you go for it,” Ms Morgan said.

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