Key Post Should I buy an apartment or a house?

[Gordon Gekko]

Some controversy erupted in a recent thread where a poster was buying an apartment in Dublin for circa €450k with a lot of equity. I strongly questioned the wisdom of such a move. I thought that it might be useful to summarise my own thoughts and obtain feedback from other posters regarding the apartment vs house issue for people who intend to live there;

Perhaps some of the positives of apartments first:

- Tends to be more security
- Less maintenance
- Single level for less mobile people
- Tend to be cheaper

And some of the negatives:

- Service charges
- Highly publicised build-quality issues in certain developments (that’s not to say that houses haven’t had issues such as pyrite)
- Social issues as a result of communal living
- Lack of clothes drying facilities
- Lack of storage
- Less suitable for children
- Value more susceptible to collapse

I’m especially wary of buying an apartment to “get on the property ladder”; I made that mistake and ended up stuck in an apartment that was in negative equity, by which time kids had come along. As a result, I’d always urge people, where possible, to push a little bit harder for the 3 Bed Semi that has a greater degree of future-proofing. In the recent crash, apartments fell further and have recovered slower; if property is an asset class, and apartments and 3 Bed Semis are sub-asset classes, then apartments are an inferior sub-asset class in my view.

And to counteract any accusations of bias, I actually own two apartments, but I would never buy another and the only reason I retain the current two is the tracker rates that attach to both (plus a degree of sentimentality in relation to one of them).

 

[Brendan Burgess]

Hi Gordon

I get the impression that you are comparing a well-built 3 bed semi with a poorly built apartment.

- Value more susceptible to collapse

Do you know if there is any data to support that houses are a better investment than apartments? It feels correct, but I would like to see the data.

Why are service charges a negative - surely they are just a replacement for maintenance charges on houses?

As a society, we have way too many three bed semi-ds and not enough apartments.

I would find it very difficult to live in an apartment - the communal living and the hassle with OMCs would do my head in.

But friends of mine who live in apartments can't understand why any single person or childless couple would do anything else.

Brendan

 

[RedOnion]

I’m especially wary of buying an apartment to “get on the property ladder”;

I completely agree with this statement.

However, in general I don't believe people who want to live in an apartment should buy a house.

One of the problems we have in this country is that apartments aren't generally planned / designed for permanent living, although it's the norm in other countries. The quality of apartment buildings generally is poor, but there are of course exceptions. You only hear about the ones with issues, but there are also some exceptional properties in Dublin, and I have friends who have bought apartments as their permanent home, along with those who have a 2nd home in the city.

 

[messyleo]

Good post Gordon - I think like anything it depends on your circumstances and goals. Different people have different priorities and lifestyles which will impact on the best choice for them. My post may be a little apartment biased as I own one, but that is possibly just because a lot of people in Ireland tend to be overly harsh, to the point where they equate apartment living to little better than dog kennels!

If you have children or intend on doing so, a house is definitely a better option long term, however if you are single or a couple without children they can be a very good option. The garden is an obvious advantage with a house, but if you are not into gardening/no kids etc. it's not a big deal. A lot of new builds have very skimpy gardens these days too.

It is true there can be noise issues with apartments, however houses can suffer from this too unless you are in a detached. I know of several people in two bed terraces or semi-ds where they can hear the neighbour going up the stairs, having a shower etc. I would not hear this in my own apartment for example, so really I think this is something that depends on the specific property rather than they type of property, though I would imagine it is certainly more common with apartments.

Storage is often very poor in apartments, and if you have children or large storage requirements, problematic. However, again you can get apartments with decent storage - I have one with two good size storage presses myself, and this is changing with newer developments I think too.

If you are buying it long term to live in, the possible increased volatility of prices with apartments is less of an issue

Service charges are often listed as negative of apartments, and they can be, especially when there are high levels of unpaid fees. However, in a well managed development they can work out reasonable. The managing agent for my block gets three quotes for all services so they are competitive - bin charges work out at about €80 per apartment - probably cheaper than if I was paying myself. The common areas are cleaned every week to a very high standard - again costs approx €70 per apartment per year. I think these costs are reasonable, and in some cases good value. Really you only have the auditor's fees (€40 per apartment/year so not a big deal) and managing agent fees (€150 per apartment/year) that don't go on an actual service for the block as such, and even then the agent looks after all the invoicing, maintenance works and upkeep, ensuring management fees are paid etc. and if they do a good job, it's ok value imo as I am not the type who loves doing home improvements or painting (some people might be though!)

Cost is a big advantage and while apartments aren't cheap, the choice for many might be an apartment in a preferred area, versus a house in a less preferred area with a longer commute. For some people it might be worth the extra time in the car to have a house, for others, being able to walk/cycle/frequent public transport from an apartment in a more accessible area might be worth it - a personal call really.

A lot of people make the shoe-box apartment argument e.g. saying a 2 bed apartment of 65-70m2 is far too small to live in. However a lot of smaller 1 or 2 bed houses are smaller than this (a couple of friends live in 55-57m2 2 bed terraces) and combined with the additional stairs and landing etc. a well laid out 65-70m 2 bed apartment with good storage can work very well. Poorly laid out apartments with rooms in funny shapes and wasted hall space/corridors can feel very pokey however.

I think a lot of the preference for housing goes back to the "traditional" view of family living etc., and now that we have a lot more people who are single, couples without children etc. a variety of different property types can work well - different strokes for different folks etc.!

 

[Gordon Gekko]

In my experience, it’s the lifts/lift maintenance and the block policy insurance that inflate the service charges; apartment rebuild costs are ludicrous (hence so few being built), and that feeds into the cost of the premium (naturally).

I’ll post the data around the price falls tomorrow, Brendan; it’s purely to illustrate the danger of being “caught out” if you’re someone who intends to be in an apartment short-term. Price volatility can hammer you in such cirsumstances, whereas a 3 Bed Semi can be suitable for the longer-term.

 

[messyleo]

I agree that life maintenance/replacement can be an additional cost with some blocks (not all blocks have lifts remember!) that you don't have with a house (unless you have a really big house! ) but lifts attract people to apartments who have poor mobility/need single level living so I always thing you recoup the cost to an extent vs those without lifts, so increase your potential pool of buyers/potential demand as a result vs a block without a lift. Hard to quantify however.

Are block insurance costs that high over similar houses? I think mine works out at about €200 per apartment (it might be slightly higher, can't fully remember off hand, I would need to dig out the annual report!) which would not be a deal breaker over a house imo.

 

[Brendan Burgess]

it’s purely to illustrate the danger of being “caught out” if you’re someone who intends to be in an apartment short-term. Price volatility can hammer you in such cirsumstances, whereas a 3 Bed Semi can be suitable for the longer-term.

I don't really follow your argument here.

Plenty of people who bought houses during the bubble got caught out too.

One should not buy an unsuitable house or apartment to get on the housing ladder.

One should not buy a house or apartment for the short term.

If you buy a one bed apartment in a large development and then want to trade up, there is a reasonably good chance that you might find a two bed in the same development. That is less likely in a housing estate.

Brendan

 

[Gordon Gekko]

I don't really follow your argument here.

Plenty of people who bought houses during the bubble got caught out too.

One should not buy an unsuitable house or apartment to get on the housing ladder.

One should not buy a house or apartment for the short term.

If you buy a one bed apartment in a large development and then want to trade up, there is a reasonably good chance that you might find a two bed in the same development. That is less likely in a housing estate.

Brendan

My argument is that purchasing an apartment as a “starter home” is a terrible idea because price volatility can mean that you’re stuck there.

Many people bought apartments which were perfect when they were single but became completely unsuitable as their lives moved on. The problem was, they were stuck there.

If someone has a house deposit saved for a purchase in five years’ time and they asked should they buy equities, we’d say no. I believe that apartment purchases are similar, except for people who can stay in an apartment ad infinitum.

My advice is that if you believe that your life is likely to be on a marriage/kids trajectory, don’t buy an apartment to live in; buy a house or save more with a view to buying a house.

 

[Brendan Burgess]

I believe that apartment purchases are similar, except for people who can stay in an apartment ad infinitum.

You seem to be conflating two separate issues here.

If someone asked you should they buy a small house or a house in an unsuitable location with a view to trading up in 5 years, I presume you would say no as well?

Your advice seems to be: Don't buy a starter home. Don't buy a home that you are not prepared to live in for 10 years.
If you are prepared to live in an apartment for ten years, then buy that apartment.
If you are not prepared to live in a small house for ten years, then don't buy that house.

Brendan

 

[Gordon Gekko]

You seem to be conflating two separate issues here.

If someone asked you should they buy a small house or a house in an unsuitable location with a view to trading up in 5 years, I presume you would say no as well?

Your advice seems to be: Don't buy a starter home. Don't buy a home that you are not prepared to live in for 10 years.
If you are prepared to live in an apartment for ten years, then buy that apartment.
If you are not prepared to live in a small house for ten years, then don't buy that house.

Brendan

No, my advice is:

- Don’t buy a property at all unless it will, in all probability, be adequate for your long-term needs. The logic being that you are protected in circumstances where you end stuck there.

That goes for apartment vs house, location, etc.

The specifics around a 3 bed house are just that you can pretty much do everything from a 3 bed house.

 

[galway_blow_in]

Hi Gordon

I get the impression that you are comparing a well-built 3 bed semi with a poorly built apartment.




Do you know if there is any data to support that houses are a better investment than apartments? It feels correct, but I would like to see the data.

Why are service charges a negative - surely they are just a replacement for maintenance charges on houses?

As a society, we have way too many three bed semi-ds and not enough apartments.

I would find it very difficult to live in an apartment - the communal living and the hassle with OMCs would do my head in.

But friends of mine who live in apartments can't understand why any single person or childless couple would do anything else.

Brendan

id prefer an appartment in dublin than a six bed bungalow in rural ireland ( unfortunately my other half is the boss )

for buy to let investors , apartments deliver a better return on capital , add to that the money to buy goes a lot further in desirable locations , very few negatives there as people will want to live in those locations so rents will be strong

management fees are in general far higher than they should be but charges are high in many areas in this country and there is a culture of acceptance around this

 

[galway_blow_in]

Good post Gordon - I think like anything it depends on your circumstances and goals. Different people have different priorities and lifestyles which will impact on the best choice for them. My post may be a little apartment biased as I own one, but that is possibly just because a lot of people in Ireland tend to be overly harsh, to the point where they equate apartment living to little better than dog kennels!

If you have children or intend on doing so, a house is definitely a better option long term, however if you are single or a couple without children they can be a very good option. The garden is an obvious advantage with a house, but if you are not into gardening/no kids etc. it's not a big deal. A lot of new builds have very skimpy gardens these days too.

It is true there can be noise issues with apartments, however houses can suffer from this too unless you are in a detached. I know of several people in two bed terraces or semi-ds where they can hear the neighbour going up the stairs, having a shower etc. I would not hear this in my own apartment for example, so really I think this is something that depends on the specific property rather than they type of property, though I would imagine it is certainly more common with apartments.

Storage is often very poor in apartments, and if you have children or large storage requirements, problematic. However, again you can get apartments with decent storage - I have one with two good size storage presses myself, and this is changing with newer developments I think too.

If you are buying it long term to live in, the possible increased volatility of prices with apartments is less of an issue

Service charges are often listed as negative of apartments, and they can be, especially when there are high levels of unpaid fees. However, in a well managed development they can work out reasonable. The managing agent for my block gets three quotes for all services so they are competitive - bin charges work out at about €80 per apartment - probably cheaper than if I was paying myself. The common areas are cleaned every week to a very high standard - again costs approx €70 per apartment per year. I think these costs are reasonable, and in some cases good value. Really you only have the auditor's fees (€40 per apartment/year so not a big deal) and managing agent fees (€150 per apartment/year) that don't go on an actual service for the block as such, and even then the agent looks after all the invoicing, maintenance works and upkeep, ensuring management fees are paid etc. and if they do a good job, it's ok value imo as I am not the type who loves doing home improvements or painting (some people might be though!)

Cost is a big advantage and while apartments aren't cheap, the choice for many might be an apartment in a preferred area, versus a house in a less preferred area with a longer commute. For some people it might be worth the extra time in the car to have a house, for others, being able to walk/cycle/frequent public transport from an apartment in a more accessible area might be worth it - a personal call really.

A lot of people make the shoe-box apartment argument e.g. saying a 2 bed apartment of 65-70m2 is far too small to live in. However a lot of smaller 1 or 2 bed houses are smaller than this (a couple of friends live in 55-57m2 2 bed terraces) and combined with the additional stairs and landing etc. a well laid out 65-70m 2 bed apartment with good storage can work very well. Poorly laid out apartments with rooms in funny shapes and wasted hall space/corridors can feel very pokey however.

I think a lot of the preference for housing goes back to the "traditional" view of family living etc., and now that we have a lot more people who are single, couples without children etc. a variety of different property types can work well - different strokes for different folks etc.!

i tried to rally other members of the management company when i owned an apartment but got nowhere , for a two bed apartment in limerick city with no lift or electric gates , the fees per annum were 1200 ( 1100 the first year ) , the cost of collecting the rubbish was 350 euro per apartment for the year , i live twenty five minutes from galway city and fifteen minutes to the nearest town and i pay 300 per year for bin collection , bin collection should be cheaper in a densely built up area for obvious reasons

 

[messyleo]

Arguably an apartment in a highly desirable area e.g. south county Dublin, could be more price protected in a downturn than a 3 bed house in the outskirts of a commuter belt depending on the cause of the shock.

 

[galway_blow_in]

No, my advice is:

- Don’t buy a property at all unless it will, in all probability, be adequate for your long-term needs. The logic being that you are protected in circumstances where you end stuck there.

That goes for apartment vs house, location, etc.

The specifics around a 3 bed house are just that you can pretty much do everything from a 3 bed house.

if i were single but had ambitions to buy a house eventually but could not afford to do so right now , i would likely buy an apartment as at least i have equity building towards my long term goal , anyone who bought nothing but had the chance for a small apartment in the past few years is not doing very well now in terms of building towards an actual house , there savings are delivering nothing in interest and rent is going up all the time

its the location which matters , not whether its an apartment or a house , an apartment in the right place is as good a buy as anything and much better than a house in a poor location

 

[messyleo]

i tried to rally other members of the management company when i owned an apartment but got nowhere , for a two bed apartment in limerick city with no lift or electric gates , the fees per annum were 1200 ( 1100 the first year ) , the cost of collecting the rubbish was 350 euro per apartment for the year , i live twenty five minutes from galway city and fifteen minutes to the nearest town and i pay 300 per year for bin collection , bin collection should be cheaper in a densely built up area for obvious reasons

Totally agree, it is very development-dependent, so buyer beware. But if you do your research, there are well managed blocks imo.

 

[galway_blow_in]

In my experience, it’s the lifts/lift maintenance and the block policy insurance that inflate the service charges; apartment rebuild costs are ludicrous (hence so few being built), and that feeds into the cost of the premium (naturally).

I’ll post the data around the price falls tomorrow, Brendan; it’s purely to illustrate the danger of being “caught out” if you’re someone who intends to be in an apartment short-term. Price volatility can hammer you in such cirsumstances, whereas a 3 Bed Semi can be suitable for the longer-term.

what inflates management fees on apartments blocks is cosy backroom deals between ( usually the original developer ) people who are some how linked beit through family or business , its like a tendering process in reverse , the managing agent gives the job of cutting the grass and collecting the rubbish to the most expensive bidder who happens to be a mate of his or his brother perhaps

he then gets his kick back or a reduced fee on his own property

anyone who thinks this doesnt happen is incredibly naive

 

[Brendan Burgess]

The specifics around a 3 bed house are just that you can pretty much do everything from a 3 bed house.

Agreed. But if I were working in Dublin city I would want to live within easy commuting, preferably cycling, distance of work.

If I could afford an apartment but not a 3 bed house, I would put a higher priority on the location.

Brendan

 

[Gordon Gekko]

Agreed. But if I were working in Dublin city I would want to live within easy commuting, preferably cycling, distance of work.

If I could afford an apartment but not a 3 bed house, I would put a higher priority on the location.

Brendan

Agreed, but I would hold-off until I could afford the 3 bed house. Because most of us apply borrowings when we’re buying a place, increased earnings tend to close a funding gap quicker than one thinks.

 

[Brendan Burgess]

But if you were a single person without children who could afford to buy a well-built, spacious apartment in Dublin 4 within walking distance of work, why would you not do so?

Brendan

 

[Gordon Gekko]

But if you were a single person without children who could afford to buy a well-built, spacious apartment in Dublin 4 within walking distance of work, why would you not do so?

Brendan

I would without hesitation.