Buy a House or a Unit?

For some looking to buy their residences rather than rent them, the choice between a single family home and a unit in a shared situation like a townhouse or condominium building, comes down to upkeep and maintenance.  Busy younger people who have no time nor any inclination for maintaining the landscape or repainting or the myriad repair tasks associated with home ownership, will almost always opt for a unit.  

Similarly, older people who no longer have the energy for the “joys” of single family home ownership will also look for units.  But suppose you’re not intimidated by the additional effort involved, and just want to know which is the better investment over time.

You can search the Internet for current numbers and you’re likely to find prices are still rising for both houses and units but houses continue to outpace units.  In Melbourne, for example, recent figures showed increases of around 9% for homes and a little over 5% for units.  You’ll find percentage increases in other areas consistent with the general pattern of increase prices in both, but higher percentage increases in homes.  Homes in Sydney over the past decade or so have appreciated 7.4% per year while units have appreciated 5.4% per year.  Why?

Most experts will say it’s the land that makes the difference.  Homes have more land and today we’re finding older homes being bought and torn down with a newer home, being built on the land.  Others argue
the price appreciation difference is more due to the availability of supply.  Units are built up into the air not spread out over scarce land; hence there are more of them and the abundance of supply inhibits price increases.  

Considering that both show a decent return on your investment, what other factors besides low maintenance and price might impact your decision?

Perhaps the one most overlooked by inexperienced buyers is the control you have over your investment.  Homeowners who want to get a dog and fence in the back yard or build a deck or install flagstone walkways answer to no one other than the zoning and building restrictions of their local council.

A unit owner, on the other hand, is limited by the rules and regulations of the building association and the other owners.  Some associations do not allow any pets while others restrict the size of pets.  While unit owners generally pay a monthly maintenance fee for routine upkeep and repairs, additional renovations can be initiated by vote of the owners.  You may have a friend or family member who was required to pay for new carpeting throughout their building they felt was unnecessary.  

At the other extreme needed renovations might be ignored in a building dominated by fixed income residents who simply don’t want to spend the money for newer windows or a new roof or concrete repairs.  If you end up in such a building your investment could be in jeopardy as the condition of the building deteriorates over time since a majority of owners are unwilling to invest in the needed repairs.

If you are in the market for a unit, it is essential you have an experienced real estate attorney who can review that association’s by-laws and regulations with you.  Do not assume that the realtor with whom you are working on the purchase is fully aware of how the building is governed.  Pay attention to the number of units and the age range of the owners.  It can be more difficult to get the necessary votes for needed improvements in buildings with a large number of units requiring more than a majority vote.  

If you are a senior on a fixed income, buying a unit in a building dominated by young professionals; you could easily find yourself overwhelmed by the cost of continual enhancements voted into effect by the “youngsters” who want to increase the value of their investment and have the money to do it!

While units may be cheaper to buy and can be relatively free of an investment of time in upkeep on your part, if you are the type who likes to control your own destiny, buy a house!