Choosing Between City Centre Apartments and Suburban Houses: A 2024 Guide for UK Property Investors

Should you invest in trendy city centre apartments or houses in a leafy suburb? For new and experienced property investors, both suburban homes and city apartments can be good investments – but which should you choose? Join me as I look into both options, the pros and cons, and which is the better property investment choice for you.

Table of Contents

What is a City Centre Apartment?

As the name suggests, a city centre apartment is a self-contained flat within a block of flats located in a city. Apartment buildings can be older buildings that have been refurbished or new builds. City apartments are popular with students and young professionals who work or study in the city.

What is a Suburban House?

A suburban house is a residential property located in the outer city limits or a smaller town or suburb. They can be terraced, semi-detached or fully detached, and either new builds or older period properties. They are popular with couples and families who commute to their jobs, are retired, or work from home.

Benefits and Drawbacks of Both Property Types

Both property types have their pros and cons – here are a few for city apartments and suburban houses.

City Centre Apartments

Pro: Lower initial investment. Often an apartment is cheaper to invest in than a house, lowering the barrier to investment.

Pro: Lower maintenance costs. Apartments are usually cheaper to maintain as they don’t have as many features like driveways, fences, and gardens, and maintenance is usually taken care of by the owner.

Pro: Higher rental yield. City centre apartments are in high demand by professionals who work in the city and can command more in rent despite being cheaper to buy.

Con: Ground rent charges. Most apartments are leasehold properties, and paying the ground rent can cut into your investment profits.

Con: High tenant turnover. People usually live in the same flat for less time than a house, so you may find yourself needing to find new tenants every couple of years.

Con: More market volatility. Inner-city apartment prices are more susceptible to market fluctuations, economic downturns, changes in urban development plans, or shifts in population dynamics can significantly impact the property value.

Suburban Houses

Pro: Less market volatility. Suburban houses are less prone to their value being affected by economic issues than city apartments.

Pro: Lower tenant turnover. Most tenants of suburban houses stay for longer than apartment dwellers, offering you a more stable investment.

Pro: More potential for appreciation. Property values of houses in suburban areas can rise over time, and offer good long-term investment potential.

Con: Higher initial investment. Houses generally cost more than flats, meaning a higher initial investment is needed.

Con: Higher maintenance costs. Houses require more maintenance and this will all fall onto you as the owner. You could get a property maintenance company to do it for you, but this will cut into your profits.

Con: Lower rental yields. Houses generally have a lower rental yield than flats. Detached houses in Birmingham had a rental yield of 4.99% in 2022 whereas flats in the same area had a yield of 7%.

Potential Returns on Investment – Determining Factors and Future Predictions

City apartments offer higher rental yields compared to houses, which is a better option for investors looking for a higher short-term ROI. Houses have lower rental yields but can appreciate more over time, offering a higher sale price, especially for savvy investors who wait until the housing market is strong. There are other factors that can affect the ROI of a property, including:

Location

The location of a property, whether a city apartment or a suburban house, can affect your ROI. Properties in locations with a buoyant property market like London, or cities growing in popularity like Manchester, can both expect a good return on investment. To achieve the highest ROI, city apartments should be close to local amenities and employment hubs – many apartment tenants will not have a car so are dependent on public transport or travelling on foot. Suburban houses don’t need to have quite so many amenities on their doorstep, but proximity to local places of interest like parks, pubs and smaller shops is appreciated, as is easy access to main roads and other transport links.

Market Trends

Market trends can affect the ROI of houses and flats – consider the effect that the pandemic had on the housing market. People were either working from home or furloughed, meaning that they didn’t need to commute, and were unable to go out and socialise for months on end, making inner city apartments less desirable and the spacious back gardens and leafy avenues of suburban houses more appealing. Since then, more people have been returning to city living, especially young people who come to study or work. Rising house prices and high mortgage rates of 2024 and beyond will make it more difficult for people to buy their own house, so the rental market will remain strong for the next few years.

Lifestyle Considerations

When deciding whether to invest in city apartments or suburban houses, individual lifestyle preferences play a crucial role. Some people prefer the hustle and bustle of city life, with its diverse cultural offerings and vibrant nightlife. Others may value the tranquillity, privacy, and spaciousness of suburban living. Of course, you don’t have to live in the property type you invest in, but your own preferences and lifestyle will inform your choice.

Life choices such as starting a family, retirement, or career changes, can influence the kind of investment you choose. If you are starting a family, you may lean towards suburban homes for the space and environment, but if you are focused on career growth, you might prefer city apartments for convenience and networking opportunities. Lifestyle preferences for diversifying investments can also play a role. Some investors may choose to diversify their portfolio by owning properties in both urban and suburban areas, balancing the potential benefits and risks associated with each.

Making The Right Choice

Only you can make the correct decision between investing in suburban houses and city apartments, depending on the factors above and your personal investment goals and financial situation. Take the time to consider the above pros and cons and your personal goals and level of expertise in each type of property, and make sure you do research into your chosen location and local market before taking the leap to investment.

Do you want to find out more about the exciting world of property investment? Join me, Liam J Ruan, and other property investment experts at a FREE Assets For Life property event to kickstart your property investment career!

At a property auction, the guide price is usually the starting price for a property. At auctions, the guide price is determined by the auctioneer and is based on the seller’s reserve price, which is a lot like the asking price and is the minimum that the seller will accept for their property. According to the Advertising Standards Authority guidelines, the guide price of a property at auction must be within 10% of the seller’s reserve price. Much like the asking price, the reserve price is not publicly disclosed at an auction.

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