House vs Unit: Stretched vs Comfortable

Hi all,

My partner and I are starting to look for a PPOR in Sydney, and I have a few questions I would like to float to the community.

I am caught between maximising borrowing potential and buying as well as we can now, vs borrowing comfortably and investing the difference (currently own two IP). My argument here being the PPOR is also a lifestyle choice, not completely financial so the return will not be as good as if purely investing the money.

The flip side of this is that if don't get into where I want to be in Sydney, it will be harder to up-size in the future taking into account capital growth across the whole market. Even if the place does grow reasonably, everywhere else will have also so its a zero sum game?

The second thing I've had in mind is what makes a unit more popular/valuable in everyone's experience (aside from location)? What is the common configuration which sells well and experiences strong growth?
- Floor size?
- Number of rooms?
- number of bathrooms?
- garage vs car space?
- Top vs bottom floor?
- size of block?
- new vs old?

Cheers!

 

My mortgage broker actually once told me that PPORs usually end up being amongst the best “investments” (capital growth wise), because you tend to pick one that has lifestyle benefits and owner occupier appeal. More expensive to get in, but when it comes to selling you are getting the same benefit of the appeal creating buying pressure.

As for stretching vs comfortable, it depends on what you forecast your future earnings potential. If you still have a long run-way, then if buying something better now, your future self may thank you (ideally you are living in it for 7-10 years minimum) . The only spanner is IR rises on the horizon may eat up some future pay increases that you should factor into your budget and level of comfort.

On apartments - I actually prefer living in apartments myself (in lifestyle locations - close to the beach) with lower overall maintenance, cleaning etc. it suits my lifestyle. Things to look out for are:
- location is CRUCIAL. People will sacrifice location to get a house for their family, but apartments to many are not their first choice. So it must be in a lifestyle location that has a lot of appeal for an owner occupier.
- avoid off the plan - the developer usually collects the upside upfront, plus build quality issues.
- the Art Deco blocks tend to always be popular if they are well maintained.
- you want to appeal to more than just FHB if possible. Eg is it a family friendly apartment or would a downsizer find it appealing? I’d suggest minimum 90 Sqm if a 2 bedder at least, with some sort of study book or balcony.
- apartments are more common so find ones with something unique - gardens, views, no common walls, bathed in natural light etc. some of the latter are things that are hard to find in houses as well, and are why I actually like apartments.
- lower density blocks.

 

Top post.


My opinion is if you can afford the home in a good OO location, I'd go the home. And don't assume it won't be a good performer either. Often PPOR homes in the long term deliver exceptional returns.

 

Choose your PPOR carefully - it may surprise you.

We bought our PPOR when our first daughter was 12 months old and I was pregnant with our second child.

Who would have thought that a home, chosen for its liveability, location, size and other features suitable for young children would be perfect for a retired couple 43 years later!!

 

We were recently faced with this decision and went for the unit over the house. We bought a 2 bedder in an older block of 6. We picked it up for about a third of what houses are selling for in this area.

We could have went for the house but that meant borrowing our maximum and taking on a huge mortgage and the restriction of freedom/ stress that comes with that.

May not have the big shiny house but we have a great lifestyle in a location that has everything we could ask for. The small mortgage also frees up a large chunk of our income to invest elsewhere and grow our wealth so that when the time comes for an upgrade we can (hopefully) do this comfortably.

Interest rate rises? Major repair on the property? Lose my job for a little while? Couldn’t care less, this is all easily manageable not having a huge mortgage.

Although a house would no doubt perform better over the long term so it really comes down to personal preference and what you value more.

 

Growth comes in many different forms when you get uncomfortable.
It’s a completely personal choice but once you settle for comfort, you stop challenging yourself.