Is a house or an apartment a better choice for a holiday property? Garry and Marion Nash.
Looking to buy a holiday property and wondering whether to buy a house or apartment? While personal preference and price will dictate the decision to some degree, a range of other factors is worth considering.
However, before addressing the question of whether an apartment or house is a better choice, industry experts point out that you first need to decide whether a holiday property is the best buy for you, noting that, in general, there are better investment options.
”I think people could have their money better placed than in a holiday area,” says the director of Property Planning Australia, David Johnston. ”Genuine growth drivers are fairly rare in holiday markets.”
For those considering a holiday property for their own use, however, Mr Johnston says, ”As a general rule, you’re probably better off with a house.”
He says that when it comes time to sell, the relative affordability of houses means apartments might be harder to move.
There’s also the potential rental return to consider for those times when you’re not occupying the property.
Matthew Neill, the accommodation development manager at Great Ocean Road Holidays, which has almost 600 properties on its books from Torquay to Cape Otway, says houses tend to be more sought-after by people looking to rent in holiday locations.
”The thing with apartments is there is just so much supply out there,” he says. ”They all do well over the peak times of the year but, when you’re going into the off-peak times, it’s just so competitive.”
Mr Neill says the top rental performers are properties that can accommodate two families, noting that, unless a smaller property has a real point of difference, ”you’re always going to get a better return for a larger one”.
Although a two-bedroom apartment might achieve $250-$350 a night during peak season in a place such as Lorne (with a week usually the minimum during the period from Christmas to Australia Day), a four-bedroom house with more than one living area can achieve from $400 a night to $1500 a night at the luxury end of the market.
Bigger is also usually better in Portsea-Sorrento, where Megan Sheedy, the holiday rental manager at Peninsula Holiday Rentals, which is part of Fletchers in Sorrento, says that while apartments can attract holidaymakers at the more-affordable end of the market, many people prefer a house. ”A lot of clients who come to Sorrento want high-end,” she says. ”They want exclusivity and privacy and houses offer that.”
Like Mr Neill, Ms Sheedy says larger houses are particularly popular, with two or more families often opting to share a property. ”Two living rooms help a lot as well, so that you’ve got one for the kids and one for the adults,” she says. ”It’s a holiday and they don’t all want to be stuck in one room.”
In Portsea, houses start about $6500 a week at peak times, which are in December and January as well as weekends during the year; in Sorrento, they start about $3500 a week. Amenities count, with pools adding as much as $1000 a week. Apartments start about $2000 a week.
Rental returns aside, there’s also the capital growth to consider when buying a holiday property. Even if buying it purely for your own use, it’s likely you’ll want to sell it at some point.
Although factors such as location will be key in determining capital growth (an apartment with ocean views close to the beach is likely to outperform a house in the backstreets with no view, for example), figures from RP Data show that, on the Victorian coast, houses have, in general, outperformed apartments during the past couple of years.
Possible reasons include the fact that houses are more likely to be owner-occupied, and units, particularly those in large complexes, can be affected by forced sales or heavily discounted sales. Units in holiday letting pools have also been affected by the slowdown in tourism.
Upkeep of the property is an important consideration when deciding between a house or apartment. Although apartments should require far less maintenance, they do attract owners corporation fees, which can be high if a building has facilities such as lifts and swimming pools. Houses, on the other hand, require more work but don’t have the fees.
”Most people, we find, who can afford a holiday property are pretty time-poor, so they generally like to have something low-maintenance. Apartments can be really good for them,” says Kim Easterbrook, the managing director of Elite Property Advisory.
However, she says a house might be a better option for those who like a bit more space and enjoy gardening, although people should consider the maintenance required. While taking care of a garden might be fun at first, is it something you will want to do year after year?
If you are opting for an apartment, Ms Easterbrook suggests that to minimise owners corporation fees, buyers should look for ”smaller blocks in a nice, quiet location rather than high-rise”.
”And smaller blocks, too, are better for investment because you are buying a higher percentage of the land versus the building,” she says. ”So if you have fewer apartments in the block, you’re buying more land.”Pros and cons of both
Wangaratta’s Garry and Marion Nash (pictured) have owned a holiday apartment and a house in the coastal community of Lorne on the Surf Coast.
Having had an association with Lorne since they were children, the Nashs bought an apartment off the plan in the Kalimna block at the southern end of town in the late 1990s and used it for their own holidays, as well as letting it out.
However, needing more room for family and friends, they decided to look for a larger place. Selling the apartment about five years ago, they reinvested the money in an older house, which they renovated and extended.
The expanded six-bedroom house with ocean views is now rented out. ”It’s probably about 50-50 for rental and our own use,” Mr Nash says. A real estate agent in Wangaratta, Mr Nash sees the house as a better long-term investment than the apartment, given land value increases, particularly in a location with very limited land supply, such as Lorne, and says rental returns are significantly higher on the house.
Matthew Neill, of Great Ocean Road Holidays, says houses such as the Nashs’ rent for $1000 a night in peak season, while apartments in Kalimna garner $350 to $400 a night.
But Mr Nash says the apartment involved far less work.
”You didn’t have to go to a holiday place and then do lots and lots of maintenance. Kalimna was a very good stepping stone. If it were just Marion and myself, we possibly would have retained the apartment.”
The original release of this article first appeared on the website of Hangzhou Night Net.