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Houses vs
Apartments What and where you should be looking to buy
House
Apartments
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Disclaimer: Information contained herein is gathered from sources we deem to be reliable however warrant no guarantee as to the accuracy of third party data. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. All rights reserved.
February 2022
Welcome Thank you for reading this report. Freedom Property Investors is not a property company. We are a community of investors accessing the hidden market of positive cash-flow properties located in high growth locations across Australia. Led by Scott Kuru and Lianna Pan, two of Australia’s most successful property investors, we aim to provide our members with investment properties that outperform market averages for both capital growth and rental yield. Lianna Pan is one of only 3,000 qualified Actuaries in the country, and together we have perfected a detailed methodology
covering all fundamental aspects affecting the residential property market. Spending tens of thousands of dollars on our research, we also employ a full-time research team with access to property specific data not easily accessible to the everyday investor. Utilising a wide team of hundreds of experts around Australia, we work toward a common goal of helping create financial freedom for our members through property. We hope you enjoy this report and we look forward to helping you leverage our data insights to achieve your financial freedom.
Lianna Pan
Scott Kuru
Founder & Director of Research
Founder & CEO
The Australian dream of owning a freestanding house on a plot of land is rapidly evolving.
W
hat started as an almost rite of passage is today becoming more and more unattainable for the average Australian. Localised demand is among a range of contributing factors that continue to push both property values and rents higher still. In the last 12 months, property prices have grown so substantially across the country that we reached a new cyclical high in January 2022 with dwelling values up 22.4% – the highest annual rate of growth since June 1989.
“... we reached a new cyclical high in January 2022 with dwelling values up 22.4% – the highest annual rate of growth since June 1989.”
House
04
Houses vs Apartments
Change in Dwelling Values as of January 31, 2022 Month
Quarter
Annual
Total Return
Median Value
Sydney
0.6%
1.8%
25.5%
28.3%
$1,106,279
Melbourne
0.2%
0.8%
14.9%
17.7%
$798,881
Brisbane
2.3%
8.3%
29.2%
33.7%
$706,594
Adelaide
2.2%
7.4%
24.8%
29.5%
$584,629
Perth
0.6%
1.2%
11.2%
16.0%
$531,243
Hobart
1.2%
3.4%
27.6%
32.9%
$707,087
Darwin
0.5%
0.7%
12.6%
19.7%
$496,476
Canberra
1.7%
3.7%
25.5%
30.0%
$906,529
Combined capitals
0.8%
2.6%
21.3%
24.4%
$801,570
Combined regional
1.8%
6.3%
26.1%
31.1%
$551,887
National
1.1%
3.4%
22.4%
25.8%
$718,146
Source: CoreLogic
Apartments
Houses vs Apartments
05
To put this in perspective, the typical Australian home is now worth $131,236 more than it was only a year ago. In 2021 we witnessed one of the fastest rates of growth that the Australian property market has ever experienced. Experts, along with the likes of Westpac and CBA, believe that there will be further growth ahead in 2022. Investors who own premium property in highgrowth suburbs are already enjoying excellent rental returns and equity growth.
Unfortunately, many investors don’t follow a set strategy and are likely to make poor investment decisions, including purchasing properties they wrongly deem to be affordable. What this means is that the investment property they chose is not the right vehicle in helping them reach their financial goals. Property investment is by no means as simple as purchasing a nice property in a nice area.
But what lies ahead, and where – and what – should smart investors be buying?
There must be stringent research and data to support any investment decision, along with careful consideration of key macroeconomic factors to determine what the best asset is for you.
As any property investment expert will tell you – the best time to invest is when you can afford to.
“Investment decisions should always be based on verifiable research and data. Otherwise, you risk
06
Houses vs Apartments
Annual Dwelling Price Growth House
Apartments
30% 25% 20% 15% 10% 5% 0% -5% -10%
cO t -2 1
cO t -19
cO t -17
cO t -15
cO t -13
cO t -11
cO t -0 9
cO t -0 7
cO t -0 5
cO t -0 3
cO t -0 1
-15%
Source: Corelogic, JLL Research d ( ata as of Sep 2021)
missing out on tens of thousands, if not hundreds of thousands, in potential profit.” says Lianna Pan. Houses and apartments are assets which can be used strategically by smart investors to allow for greater, and potentially faster, growth and cashflow. The median value of all dwellings across Australia is currently sitting at $718,146 – representing another month of positive growth. Historically low interest rates, in conjunction with the now defunct Home Builder stimulus scheme, resulted in rapid price increases of houses throughout late 2020 until mid 2021. At this same time, a lack of overseas migration, international students, and tourism saw a downward trend on apartment asking prices. Because of this, the gap between houses and apartments has widened, and the affordability situation in many cities is such that the prices of detached houses are now moving beyond the reach of buyers on average incomes.
“Investment decisions should always be based on verifiable research and data. Otherwise, you risk missing out on tens of thousands, if not hundreds of thousands, in potential profit.” says Lianna Pan.
Houses vs Apartments
07
National Stratified Median Price of Houses Quaterly change
Annual change
$1,149,828
4.6%
30.4%
$1,021,790
$888,755
1.6%
16.8%
$702,455
$673,176
$609,304
4.3%
15.3%
Adelaide
$667,888
$632,337
$555,920
5.6%
20.1%
Canberra
$1,074,187
$1,015,833
$811,421
5.7%
32.4%
Perth
$598,601
$602,248
$545,129
-0.6%
9.8%
Hobart
$698,212
$631,630
$529,190
10.5%
31.9%
Darwin
$640,068
$608,760
$480,620
5.1%
33.2%
Combined capitals
$994,579
$961,182
$816,082
3.5%
21.9%
Capital City
Sep-21
Jun-21
Sep-20
Sydney
$1,499,126
$1,432,901
Melbourne
$1,037,923
Brisbane
Source: Domain House Price Report Q3 2021
Urbanisation, along with advancements in technology, has contributed to the growing demand for more affordable dwelling options in areas that are still closely linked to business districts and employment hubs. The rising cost of living in conjunction with sky-high property values has meant that many would-be buyers are now starting to turn their favour toward apartments and Strata dwellings. Apartments generally offer a lower-priced entry point to the market as opposed to freestanding houses in the same areas. They are also often located in more populated areas where there are far more employment opportunities, compared to regional areas with predominantly detached housing. Add to this the tight rental markets being experienced across various regions, and you can understand why many investors are flocking to this asset class as part of a strategic investment plan. For example, we’re seeing in Melbourne a median house price of over $1 million compared to a median unit price nearly half that at $576,879.
08
Houses vs Apartments
Melbourne Median Price
Houses
$1,037,923 Source: Domain House Price Report Q3 2021
Moreover, three out of eight of our capital cities are also now seeing median house values over the $1 million dollar mark. With increasing demand from tenants priced out of the detached housing market, asking rents of innercity Melbourne apartments have jumped by more than 10% in the past year. Despite being one of the most COVID-impacted property markets in Australia, Melbourne’s rental growth as recently as December 2021 was among the fastest growing in the country.
National Stratified Median Price of Apartments Quaterly change
Annual change
$733,049
2.4%
9.5%
$575,133
$543,587
0.3%
6.1%
$396,609
$398,538
$403,766
-0.5%
-1.8%
Adelaide
$357,615
$340,586
$346,024
5.0%
3.3%
Canberra
$489,710
$504,217
$502,548
-2.9%
-2.6%
Perth
$363,653
$376,029
$359,132
-3.3%
1.3%
Hobart
$532,284
$532,284
$430,072
0.0%
23.8%
Darwin
$359,903
$364,187
$294,668
-1.2%
22.1%
Combined capitals
$609,642
$603,435
$571,016
1.0%
6.8%
Capital City
Sep-21
Jun-21
Sep-20
Sydney
$802,475
$783,781
Melbourne
$576,879
Brisbane
Source: Domain House Price Report Q3 2021
Melbourne Median Price
Apartments
$576,879 Source: Domain House Price Report Q3 2021
We anticipate this momentum gathering pace in Melbourne in the months to come as international borders reopen and a wave of foreign visitors and students add to the already strong domestic demand. International migration has long played an important role in driving demand through population growth. In 2019, Victoria had the highest number of overseas arrivals with approximately 75,000 new residents calling Victoria home.
Houses vs Apartments
09
Components of Annual Population Growth Natural increase
Net n I terstate Migration
Net v O erseas Migration
100,000 75,000 50,000 25,000 0
AC T
N T
TA S
AW
SA
QL D
VCI
N SW
-25,000
Source: Australian Bureau of Statistics, National, state and territory population December 2019
With the reopening of international borders, investors can expect to see renewed migration to the Melbourne region following the decline witnessed in June last year. When assessing the pros and cons of investing in either a house or an apartment, investors need to consider the bigger picture along with their own personal circumstances and investment goals. While buyers will readily pay a premium for the space that detached housing provides, apartments do tend to cost less in terms of up-keep.
Knowing which asset class is best suited to your financial needs is the first step in creating a strategic investment plan. Residential property is considered among the safest investments Australians can make. In times of global uncertainty, and in addition to recent discussions surrounding rate rises and inflation, property owners can feel safe knowing that their investment is protecting them.
Houses, particularly established or older homes, are likely to require more regular, and more costly, on-going maintenance.
By understanding what areas to invest in and which asset will perform best, can allow for greater profits in a shorter period of time. Investors in 2022 need to be ahead of the curve and have access to the right data to be able to make these strategic decisions.
Unlike newly built properties where buyers gain building insurance for a period of time, established or older homes often encounter problems both big and small that can give investors a nasty surprise.
At Freedom Property Investors, we employ a team of researchers and data scientists that are constantly monitoring the property market to identify opportunities for our members.
Blue-chip properties close to high levels of amenities and quality infrastructure will almost certainly have far greater investment potential in the long term.
Our team will work closely with you to determine your investment goals and create a strategic plan for you to achieve them.
Investors can also find greater return and growth potential in non-high-density areas with limited supply pipelines.
We continue to help thousands of everyday Australians at every step on their path toward financial freedom, through safe and responsible investment strategies.
Speak to one of our experts.
Talk to us
Hear from some of our members and the results they are achieving:
Monika L.
Daniel & Bree
Dallas & Olivia
Nick O.
Jack N.
Patricia B.
View more of our member success stories:
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1300 766 791 contactus@freedompropertyinvestors.com.au
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