A combination of population growth, a lack of housing stock, and higher borrowing costs means that the Australian dream of home ownership is becoming harder than ever before.

While many of us would define ‘home ownership’ as owning a house, this is a definition that’s likely to change as affordability worsens and we move towards higher density living.

Indeed, there’s no reason that homes have to be houses, and if you’re looking to get into the property market, one of the best alternatives to a traditional free-standing house is a unit.

Why buy a unit?

No longer just for downsizing retirees, units are becoming increasingly popular with home buyers as a less expensive way of getting onto the property ladder – either as an investment or a primary residence.

Compared to houses, units do in fact present a number of advantages.

Price

The most obvious advantage of a unit is cost. As the table below shows, the price of your average unit is 80 per cent that of your average house.

Because they’re more affordable, units make it easier to buy in suburbs that might otherwise be too expensive.

In addition, Residex analysis revealed that unit  price growth for the 12 months ended January 2010  was similar to that of houses, coming in at around 9.2% compared to 9.8%. Units are growing in popularity and demand is helping to push up prices.  

Location

While new housing estates are being built further away from city centres, units are often much closer to the centre of town – allowing you to buy in the suburb you want to live, not just where a development is being built.

Living close to the city centre will also save you considerable commuting costs.

Community

Compared to a house, units often provide a greater sense of community and personal safety because of their proximity to neighbours.

Depending on your want for privacy, of course, this might be of lesser appeal.

Running costs

Thanks to their size, units are cheaper to run than houses. Not only is there less land and a smaller building to heat, cool, maintain, clean and repair, but certain costs – such as communal gardens and driveways – are shared between the unit owners.

What to consider when buying a unit

Just because a unit is smaller, that doesn’t mean there’s less to think about when purchasing one.

Units usually lack a large land component (land appreciates over time and delivers a large part of any property’s value) so, when buying, concentrate on attributes such as your unit’s location and design, as well as its size.

Because you’ll be close to your neighbours, check whether the unit is well insulated against noise. Examine wall thicknesses and check for common walls or any restrictions on the type of floor coverings you’re allowed (floorboards transmit more noise than carpets, for example).

You should also consider security. Look for signs of vandalism and ask about break-ins or other problems.

Finally, try to get a feel for the social dynamics of the community of unit owners. Happy people tend to stick around, so investigate how many units are rented or owner-occupied, and the tenure of those who live there.

Body corporates

When buying a unit, you may also be required to join and follow the rules of a body corporate (or an Owners Corporation if you buy in Victoria).

The body corporate’s role is to manage and look after the interests of all unit owners, and its rules and restrictions (governing pets, car parking and communal spaces) will affect you, so be sure to check these before you buy.

It’s also a good idea to read the latest body corporate minutes to get a feel for any issues that are current and how they are being dealt with. Similarly, you should familiarise yourself with the typical contributions to shared maintenance costs that are required.

The rules and regulations of a Body Corporate or Owners’ Corporation can set significant ownership and occupancy requirements and restrictions, so be sure that you understand what your rights and obligations will be before you agree to buy.

Summing up:

With Australian property prices on the up, units are a great alternative to the traditional detached house and offer both price and location advantages.

If you’re prepared to run a smaller home while living more closely with your neighbours, they’re an excellent way onto the property ladder. If you do choose to buy one, you certainly won’t be alone. As our population increases and our cities become denser, they are very much the future of the average city-dweller’s home.

Pete Boehm is co-founder of Our Home Sweet Home – a home buyer and property investor resource where you’ll find home loans, mortgage calculators, guides and more. If you’re looking to buy your first home sign up to Our Home Sweet Home’s free seven week e-mail course 7 Steps to Home Ownership. Follow Pete on Twitter or join the conversation at the Our Home Sweet Home Blog. You can also ask Pete a question.