Over the time, Investor always had one question that comes up more than any other is,

Wouldn’t a house with a capital land growth make a better investment than a one bedroom apartment?

The answer is never a simple “yes” or “no”, but rather “it depends” – it depends on the property, it depends on the location and it depends on your budget too.

The real trick is to ensure that your target property will deliver the highest capital growth. With a budget of $800,000 or more for a city property, a house is usually the better option. Under $700,000, an apartment is usually a better investment.

Many first time investors assume that houses are always better as investments as they have more accommodation and land. This may have been true once, but as a growing number of Australians have come to prefer living closer to the centre of town, the patterns of growth in property values has changed.

Apartment owners have been one of the greatest beneficiaries of this trend. And we can see this in the figures published by Real Estate Institutes in three states. Over the last five years, In Melbourne, prices growth for houses and apartments was almost dead even at 55.3 per cent and 54.4 per cent respectively. The median price for a Brisbane apartment grew by 42.5 per cent while houses grew by 38.2 per cent.

In Sydney over the last five years, the median price house growth was 30.1 per cent, well ahead of non-strata properties, mainly apartments, which grew by just 10.5 per cent. But when we look at inner Sydney, units grew by 33.6 per cent. It’s this inner suburban performance which points to the reasons why apartments can perform as well as a house – and in some instances, even better.

As more people choose to live in inner city precincts, closer to work and the attractions of urban social life, the land that inner city properties sit on has become increasingly valuable. Apartments are most likely to be built in the inner city areas – they take up a higher share of the land there than anywhere else. Owners of apartments are sharing in the rising value of the land that their buildings stand on – providing their complex has fewer than 25 apartments and the location is second to none. Apartment investors therefore benefit from the appreciating land values even though they don’t have a direct landholding.

Not all inner city apartments share in the growth, however. Poorly located or poorly designed apartments miss out. High rise apartments often miss out too, primarily the result of having hundreds of units on one site. This leaves a small amount of land value for each owner – sometimes just 10 per cent or even less of the purchase price. But well-positioned established apartments in low-rise, inner city apartment can be as strong an investment proposition as any other in the Australian property market.