Does half a duplex have the same growth rate as a normal house?

All things been equal, will half of a duplex have the same growth speed as what a house would if both were in the same street?

Or would the house go up in value faster as a few years go by due to having more land? I know the house will always be worth more but it's the speed of the growth that I'm questioning.

The reason I'm asking is because I want to buy a brand new duplex (half of one) now for $900k in Sydney and in about 4 years I want to sell it and buy a house. At the moment a house in the same suburb is around $1.2m.. $300k difference.

I'm worried that as time goes by that the difference will be greater, or is this not the case?

For the sake of the calculation, if both the house and the half duplex were next to each other in the same street would there always be that same '$300k' difference in price? Or would I find that 10 years later the house is now worth for example double what the duplex is worth?


-Frank

 

Both new products have both developer's & builder's profit & get factored in the purchase price. Both new buildings will depreciate.

Four years may be too small a timeframe to realise a capital gain.

 

Leys say 10 years then..

I'm just trying to work out if the duplex (half of the pair) will rise in value at the same rate and amount as the house would..

Like for instance, if I was to compare a unit and a house in the same street, the house would go up in value faster than a unit because the unit has little land value.

This is the comparison I'm trying to make but rather than with a unit and a house, I want to compare a duplex and a house. Assuming the duplex is half of the land size as the house.


-Frank

 

It should still be worth 3/4 of the value of the freestander (or whatever the % difference) assuming that there's not been any changes to density.

 

Even if they increase at exactly the same rate, the difference will also increase.

Say duplex worth 75% of a house.

Present:
House $1.2m. Duplex $900K. Difference $300K.

Later:
House $2m. Duplex $1.5M. Difference $500K.
Marg

 

Just buy both halves of the duplex and get the best of both worlds.

 

I bought a duplex. On average in my area, I found house typically increase faster and higher than duplex.

 

What is a duplex & what’s it got going for it? - realestate.com.au

Location is critical. As are other supply- demand factors. Watch out especially for supply...and that could very well decrease the cg. Not a significant decrease but not the same as a house in the same area either.
It must be cheaper than the house..assuming same quality and location. If it's not, then usually the location will differ. Eg the house may be middle of suburb, but duplex will be nearer to public transport. Get into details of the location of both.
The resale market as the article suggests is large for duplexes - downaizers, Fhb, students, investors, young families. In this regard, I'd say the market is bigger for a duplex than house. This also increases the liquidity more than a house.

 

Why is this the case do you think? Is it because the house has more land to start with?

Land is Land isn't it? Regardless of wether it belongs under a duplex (half of the pair) or under a house?

I thought that Land is most valuable when it can be developed, like if you have a house with enough land to build a granny flat, then the land is more valuable.

But what about these new suburbs where the house has taken up almost all of the land.. How valuable is the land then? Wouldn't this be the exact same growth rate as that of the land under a duplex?

I've been trying to work out if buying a duplex can be detrimental in the long term in comparison to a house.. But to compare apples with apples.. lets assume the duplex land is 300sqm and so is the house.

In 10 years wouldn't they both be worth the same if they are in the same street?

I want to start with a duplex, sell it in a few years time and buy a house.. Obviously I need to put in more money but I don't want to be at a loss for the sole reason that I bought a duplex to begin with.

I'm worried that the house will slowly become out of reach if I start with a duplex now..


-Frank

 

I think the perception is that a duplex half is worth less because the perception is that people can do less with that type of property. In reality, it could be a way to buy underpriced land and increase the value.

 

duplex is a complex product. because it is only 20-30% cheaper and you don't own the lot. I would prefer to spend the extra money and be a real owner. duplex will be preferable if it is more than 50% cheaper because you own 50% and you have the overhead of body corporate too

 

It depends. There are duplex halves where you do own the lot. Or you may be able to subdivide. This is where the opportunities are. Buy a duplex that has not been split. Split it. Demo. Cheap block. Or renovate and extend.

 

land appreciates/depreciates and buildings deprecate...

The house will cost most and have a larger holding cost but comes with more land content and less building content.

Say the house worth 1.2M is 1M land and 200k house (depreciated value), where as the duplex is 500k land (just took 1/2 of house land price) and the building is 400k or 900k total.

If land grows at 10% and building depreciates at 3% (including fittings) for the house and the duplex will deprecate at 5% (as it is newer) after 1 year the following is the number;

House - Land 1.1M + House 194k = $1.294M (94k increase or 7.83% gain)
Duplex @ 5% dep - Land 550k + House 380k = 930k (30k increase or 3.33% gain)

even if you keep the numbers the same using 3% dep
Duplex @ 3% - Land 550k + House 388k = 938k (38k increase or 4.22% gain)

I could argue that the house land should gain more as someone can build a duplex on the property but using the 10% land growth and 3% dep there is a difference of 3.61%.

The beauty with investing it is compounding, if we did the same thing next year;
House Land 1.21M + House 188k = 1.398M (104k (194k total) or 8.03% gain (16.5% total))
Duplex @ 5% = Land 605k + House 361k = 966k (36k increase (66k total) or 3.87% gain (7.33% total))
Duplex @ 3% = Land 605k + 376k = 981k (43k increase (81k total) or 4.58% gain (9% total)

Not going to keep working out the numbers for you, but you can keep working them out. However the newer the building the more depreciation will be and the larger the land % the great the gains.

If land went back 10% on year 1
House - 910k +194 = 1.104M or -8%
Duplex @ 5% - 455k + 380k = 835k or -7.22%
Duplex @ 3% - 455k + 388k = 843k or -4.77%

I would say that 5% duplex is similar to House in terms of losses and the house hasn't done to badly compared to the 3% duplex.

At the end of the day the building depreciating is guaranteed, although it gets less amount each time because a new house will have significantly more deprecation than a house 20 years old and a house that is 50 years has pretty much nothing (unless improvements have been done)but the land appreciating or depreciating is unknown (to an extent).

Long term the land will keep growing and the building will keep losing value until it reaches zero.

 

House will grown quicker as more land. Structure on land will depreciate over time but the land itself will appreciate.

 

Agree. This is why I buy entire land with duplex on it. This way I own all the land he get the yield of duplexes in the meantime.

 

Great thread but are we missing one simple factor here. How bad does the owner of the other half want yours?