When it comes to a property investment sweet spot, we usually concentrate on price points of between $300,000 and $600,000.
The thing is, at the moment, we are actively buying houses for our clients in that price range in numerous locations across the country.
There are myriad reasons why we’re doing this, however, one of the most important is the usually superior capital growth performance of houses over units over time.
Plus, while Sydney was stealing all the headlines with its price growth mid-decade, savvy investors were looking further afield to find more affordable locations that had significant price upswing potential.
I have written before about there being a plethora of investment-quality markets across Australia, including capital city and regional locations.
Geelong was recently named by CoreLogic as the best regional performer last year with house price growth of 16.1 per cent and 11.9 per cent for units.
That difference in dwelling performance was apparent in many other results last year, too, with the Sunshine and Gold coasts posting median house price growth greater than the performance of their respective unit markets.
In Brisbane, for example, median house prices increased but its unit market reported price falls.
Why we buy houses
There is no doubt that unit living has matured over the past few decades, especially in our two biggest capital cities.
However, land has always been – and will continue to be – intrinsically more valuable because of its scarcity.
Now, I’m not saying that Australia’s doesn’t have much land because, of course, it does – in fact, it has more than 7.6 million square kilometres of the stuff.
The issue is that 85 per cent of our population choose to live close to the coast where there is no more land available.
Sure, the solution in some locations like Sydney has been to build up and not out, but that is not necessary around the country – even if more people are choosing units as their first choice these days.
While demand for units will no doubt continue to increase, at the present moment, we believe affordable houses offer the best opportunities for long-term capital growth.
That’s because they remain the top pick for owner-occupiers who generally make emotional decisions when it comes to buying a home, which helps to drive up the price.
Ditto, with demand, with robust competition for houses usually usurping units in the majority of locations across the nation.
It’s simple economics, really, because if more people want something than there is the ability to supply, then prices will naturally increase.
This is especially the case in locations such as Geelong or in Greater Brisbane because the predominant dwelling type in these locations are houses, however, there isn’t a huge threat of future oversupply because of the paucity of land in both of those – and many other – areas.
The historically better performance of houses over units cannot be denied, so when there are still ample opportunities to buy them affordably it makes financial sense to do so.
In coming years, this may change as our population skyrockets and our society evolves, but until that day dawns, I’d rather invest in dwellings with plenty of runs on the board, rather than ones whose moment in the sun has yet to arrive.
