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Land, house or unit: What is a better investment?

Watch Stuart Wemyss explain the benefits of investing in a house or a unit. How land impacts profit and protecting your investment.
So Stuart, is there a preference for houses or units amongst investors? If you can afford to buy an investment-grade house– so I’m not talking about a house in the suburbs 30 Kms away from the CBD because that’s probably not going to have the same imbalance between supply and demand as opposed to something that’s closer to the CBD. Not in the CBD but closer to it. So if your budget allows, then a house will perform better solely because you get more land. Typically with a house, it might be 70%, maybe even 80% in terms of overall value as land value and only 20% to 30% is building value.
If your budget doesn’t extend that far, then certainly investment-grade apartments will still perform well. Typically, they’re built prior to the 1960s and 1970s, so certainly nothing new– no new stock because that typically tends to be too much building value, and the apartment still has to have more than 50% of its value in attributable land value. So there’s this misnomer that you buy houses because they have land and apartments don’t have land. That’s a little incorrect. I mean, if you think about a block of art deco units in South Yarra, for example. Typically, they’ll sit in a very valuable parcel of land. Maybe the land’s worth $3 million, and there might only be six units on that property.
Now, if a developer was to buy that and knock it down and rebuild, they’ll probably put 40 units on it today. So notionally, each unit holder or apartment owner has a 1/6 share in that $3 million parcel of land. So apartments do have attributable land value. The problem is just new-build apartments typically– it might be only 5% of its overall value, and that’s why they don’t work as an investment because they generate income. You know, renters will pay more for accommodation, and I’ll say investors should pay more for land. So new-build apartments work well for renters because they provide a lot of accommodation.
They don’t work well for investors because accommodation buildings– they depreciate over time and depreciate quite heavily in the early years of ownership as well.
Should you invest in land, house or unit?
Listen to Stuart Wemyss, Founder of ProSolution Private Clients, discuss the importance of land when considering buying “a house or a unit” in Australia. Could you make a similar observation in your country or region? How do increases in prices of land, house and unit compare in your area?

Your task

Let us assume median house price in Melbourne is AUD$600,000. If you had this amount available to you, would you prefer to invest this amount to buy land, house, unit or apartment? Explain why and whether it will vary depending on whether you are buying it for shelter, rental income or long-term wealth generation.
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What Influences Property Values?

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