But is it a question that is being asked by many Canberrans? If you were to look at the pace of development and the planned construction of 50 metre high apartment buildings down Northbourne Avenue, you would think that the ACT Government and developers have the answer and it is: buy an apartment.
But is this a case of the phenomenon known as the ‘Mandela Effect’? The Mandela Effect is where you believe something in a particular way only to discover you’ve remembered it wrong.
Having lived in Canberra for 40 years, very few of the people I know live in apartments. In fact, only one of the members of my immediate family, including nieces and nephews, live in an apartment. Not a scientific survey I know, but is there really a trend and desire for Canberrans to move out of their homes into apartments? And are first home buyers opting for apartments over houses?
All of the ACT Government’s rhetoric is about increasing urban density and going up, up and up. But is this what Canberrans are calling for or is this a case of ‘hipster’ urban planning i.e. harking back to the 1940s where unfettered planning throughout the USA led to people drifting towards cities with good and bad consequences?
The good included the explosion of jazz as an art form and the innovation and sharing of ideas from all over the world in the melting pots of densely packed cities that started going up and up.
The bad of course was the crime, slums, poverty and massive inequality that came from poorly planned, out of control, rapid development.
So, my basic question is whether the explosion of apartments in Canberra that have been built, and are in the pipeline over the next decade, are a response to demand from the Canberra community or a project in social engineering by the ACT Government and property developers?
I expect it, like most things, is a bit of both …
So, what are the factors people take into consideration when deciding to purchase an apartment or a house?
Well, after some serious internet research, it depends whether you are buying to invest or live in the property – after that, there are a whole range of other factors that come into play, such as price, age, marital status, children, location, noise, maintenance costs, insurance, employment, retirement, education, amenities, access to transport, shops, entertainment, land tax, rates etc.
Ok let’s start with price:
The cost of most apartments in Canberra are cheaper than houses. The QBE Australian Housing Outlook 2017 – 2020 showed that as at June 2017, the median price of a house in Canberra was $645,000 and the median unit price was $425,000. This is a significant difference of $220,000.
For some people, the significantly lower price of apartments compared to houses will enable them to either purchase their own home or to start investing in property.
The QBE Australian Housing Outlook 2017 – 2020 forecasts that growth in Canberra house prices will be 16.3 per cent ($645,000 median price to $750,000) – the largest increase in Australia over that period – and 2.4 per cent for units ($425,000 median price to $435,000).
Based on these forecasts, it would appear that in the short term over the next three years, investing in both houses and apartments in Canberra will be profitable – but, there is a significant difference between 16.3 per cent and 2.4 per cent.
But, taking a longer outlook, the average annual median percentage price growth from 2000 to 2017 for units was 7 per cent and for houses was 8.4 per cent. Not that much difference over the longer term.
Taxes, fees and charges
There is of course money that you pay to the government, and for maintenance and insurance, when owning property. These include:
The average Canberra household rates bill in 2017 was $2295 and for units was $1452.
Fire and emergency services levy:
$294 per year for houses and units.
Annual owners corporation, fees, levies and charges:
With an apartment, the owner’s corporation sets an annual budget based on the previous year’s cost and estimated increases for the following year. The budget includes the cost of water, insurance and external maintenance (gardening, cleaning, painting etc).
In addition, there is usually a ‘sinking fund levy’ or ‘maintenance levy’. This is generally an annual fee for bigger capital replacement or maintenance projects.
These costs are split amongst the owners depending on their ‘unit entitlements’. This means that larger apartments contribute more.
Owners corporations decide whether these fees and charges are paid annually or by regular payments throughout the year.
If you own a house, then you are required to do all of the administration yourself. You need to organise and pay all the utility bills, organise insurances and all maintenance – such as gardening, cleaning, painting etc. The benefit, of course, is that if you want to plant corn in your back yard, keep chickens and paint your front door a different colour to your neighbours – then the world is your oyster.
The RiotACT spoke to Chris Miller, Managing Director, Vantage Strata, to ask whether there was a growing market for apartment living in the ACT.
“Canberra’s attitude towards apartment ownership and living has transformed in the past decade or two, driven by a range of factors,” Chris says.
“One simple explanation is that our population is growing and these people all need to live somewhere. It is not possible to forever expand our borders and find new suburbs for the ‘traditional’. This is land-intensive and causes stress on public infrastructure such as roads and public transport.”
Of course, the story is more interested and complicated than pure population.
“Another aspect is that people are getting married later and are making different lifestyle decisions. The number of people living in each dwelling has actually shrunk, therefore more homes may well be required in the future to accommodate the same number of people,” Chris explained.
But, is this a conscious decision for people to move to apartment living?
“I don’t automatically accept the premise that owning an apartment is more expensive due to strata levies. For the most part, strata levies simply re-organise the ordinary cost of property ownership. Just because you own a house in the suburbs does not mean that you shouldn’t be making an allowance to have it re pained every ten years. In that way strata levies just set in place a more rigorous process for meeting your short and long-term obligations,” Chris argues.
“I am also not particularly swayed by differences in capital gains of apartments compared to houses. Apartments will probably have a less even trajectory in the short term due to the supply of new apartments being much more ‘lumpy’ than houses.”
That being said, people measure their return on investment in many different ways.
“The apartment I own and live in might increase in value at a slightly slower pace than the suburban houses that some of my friends call home. However, I walk to work every day and therefore my partner and I only need to service the cost of one vehicle – not to mention I spend far less time commuting each week, which is worth more than money to me. That is one example, however, it is not difficult to join the dots to similar efficiencies in cost and lifestyle that apartment living can offer,” Chris outlined.
This article has focused primarily on the costs involved in owning an apartment or a house. There are of course many other factors that come into play including, safety, amenity, location, transport, age, disability, work, family etc.
But for this trumpet playing, chicken, dog and goldfish pond owning father of a teenager on a quarter acre in Ainslie – moving into an apartment at Kingston Foreshore is not really an option at this stage … but give it some time.
Are you looking at getting into the Canberra property market? Will you be buying a house or an apartment?