Tips when buying your first apartment

7 things to consider when buying an apartment

1. Location, location, location

Choosing a good location is the golden rule of any property purchase, so it may be wise to purchase an apartment in the best location you can afford. As a rule of thumb, apartments in Australia tend to be built in more popular locations, or those with existing amenities such as transport, schools, commercial centres, and outdoor spaces – but not always. If you’re vacillating between an older apartment in a great area or a newer apartment in a less sought after area, a property expert may tell you to buy where people want to live. Ultimately though, the choice is yours.

An apartment should be chosen on the basis of your needs, lifestyle, and future plans. Bear in mind, your first apartment may not be your forever home, so it’s wise to search for something that has the potential for good capital growth should you wish to sell it down the track. Alternatively, you may consider renting it out at some time in the future, so a great location and access to amenities can be key to attracting tenants and good rental income.

2. Old, new, or off the plan?

This can come down to personal preference. Old apartments can come with inherent and ongoing maintenance costs while newer apartments may keep those expenses at bay for longer. This can be a relief if you’re settling into repaying your first home loan.

Newer apartments can also be more energy-efficient than older ones, meaning you’ll also save money on heating and cooling costs and other utilities. On the other hand, older apartments can be more spacious, affordable, and have more character. They can also provide the opportunity to renovate and add value.

The other option is buying off the plan or signing a contract to buy an apartment that hasn’t been built – or completed – yet. The big advantage of buying off the plan is that you agree to a purchase price and generally only need to offer a small deposit. This could mean paying considerably less than the property is worth by the time you move in (but it can also go the other way as well). It also gives you more time to get your finances in order.

Another advantage of buying off the plan is that you could save a significant lump of money on stamp duty, as most states and territories offer major discounts to people buying newly constructed property. However, there are also a few things that can go wrong with off-the-plan buying, such as construction delays, developers going bust, and being disappointed with the final product.

3. Strata fees and sinking fund

Buying any property means signing up to ongoing costs, such as council rates, insurances, and utilities. But buying an apartment also comes with mandatory strata fees that are levied on all apartment owners for the maintenance and upkeep of buildings and common areas.

These common areas can be as simple as a shared driveway and stairwells but, depending on the complex, can extend to gardens, lifts, pools, gymnasiums, barbeque areas, tennis courts, and saunas. Not surprisingly, strata costs can be considerable, and you'll have to pay them whether you use the facilities or not. It’s also an expense that lenders will consider when determining your ability to service a home loan and meet ongoing strata levies.

Before you purchase an apartment, it’s essential you investigate the accounts and workings of the body corporate or strata committee, as well as the minutes from recent annual general meetings (AGMs) to get an idea of recent and possible future issues. What you find out should play a significant role your decision on whether to buy into a strata property or not.

As well as a well-administered fund for general expenses, strata properties should also have a healthy sinking fund to cover the cost of unexpected repairs and future maintenance or replacement of shared facilities. If the sinking fund is depleted and you can see major maintenance issues could be looming, it may be a good idea to steer clear.

4. Community living

By its very nature, apartment living means sharing spaces and amenities. While this can give you access to facilities you might never be able to afford yourself, you’ll have to enjoy them alongside other people living in the complex – and perhaps their guests.

It can be difficult to know what your neighbours are like until you move in but, before you buy, do your research into any past issues according to the body corporate’s meeting minutes. Also, take a good look at the body corporate’s by-laws on facility use, noise, car parking, pets … even whether you can smoke on your balcony or choose your own window dressings.

Ask yourself whether you’d be comfortable living within such rules and in close quarters with others. It may be that a smaller building with fewer facilities that requires less regulation may suit you better.

It’s also worth asking whether the complex allows short-stay accommodation to operate. This can be a negative if you’re planning to live there permanently but a plus if your plans change in the future and you look to rent your apartment out.

5. Storage

This is something that can be overlooked in the search for an ideal location, a great building, and good amenities. Some apartments just don’t cut it when it comes to storage space, regardless of whether they’re old, relatively modern, or being built off the plan.

If you’re not going to be able to store all your possessions within an apartment, you either need to offload some of them or pay for storage – hardly an economical option.

6. Security

Apartment living can make some people feel more secure, but you need to consider security arrangements for the complex as a whole. Even if an individual apartment seems well secured, you might still be up to pay for any damage or theft that affects common property. As well, other residents may have access to shared car parking space or storage facilities, so you need to be comfortable with security provisions the complex has in place.

7. Nearby developments

For any property purchase, it’s worth checking whether there are any planned developments in the area. These often change the character of a neighbourhood, in some cases adding value by providing additional amenities or facilities.

But if another apartment complex is planned near where you’re looking to buy, this may detract from the future value of existing units as the market becomes flooded with newer, more modern options. Such developments can also increase traffic and monopolise on-street parking in the area. A solicitor can assist you in finding out what developments are slated or proposed in an area as well as any other issues that need to be considered in deciding whether to purchase.

Is buying an apartment a good investment?

Chances are, if you’re buying your first apartment, it’s because you're looking to live in it. Purchasing a well-located property that you can afford and gets you into the market is almost always a good long-term move.

While it’s true apartments and units haven’t seen the same value growth rates as standalone houses on a national basis, there are variations between markets. These can be driven by local supply and demand and, in recent times, greater activity at the more affordable end of the market, particularly among buyers seeking units after being priced out of the market for a house.

But despite lower capital growth, as investments, units have their advantages over houses. They have the potential to provide a more consistent source of rental income (as they’re often cheaper to rent and located in desirable markets) and often require less maintenance and management than a house should you ever decide to put it on the rental market.

What to aim for when buying an apartment

Building scarcity into your apartment purchase can be a good strategy. Check whether there are development or rezoning proposals in the areas you’re looking in. If there are proposals for an exorbitant number of new unit developments, it could signal potential for a future oversupply of apartments that could depress capital growth of existing units.

As with all property purchases, location should be a major determinant of where you buy – perhaps rated more highly than age of the apartment, space, decor, or even price. Simply put, if you buy in the best location available to you, it stands you in good stead for your apartment to be a sound investment.

Other first homebuyer considerations

If you’re a first homebuyer buying an apartment, make sure to take advantage of any government schemes and concessions available. They’re typically aimed at helping first homeowners get into their own homes sooner.

Of course, a home loan with a competitive interest rate can also do wonders to help you get into the market and keep you there.

The table below features home loans with some of the lowest interest rates on the market:

Important Information and Comparison Rate Warning

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