Invest in Houses or Apartments?

Should you invest in houses or apartments (flats), or both? We will dive into the pros and cons of investing in houses and apartments, and try to determine which one is the better option.

Before we get into the details of which property type is better, let's clear up the meaning of flats versus apartments. "Flat"/s is originally a British term from Old Scottish/Old English word 'flet' meaning the interior, whereas apartment is an American English term, however, in the UK, although you can use the two words interchangeably, the difference between a flat and apartment generally denotes size and style. So a flat is normally used for single-storey living in lower-cost accommodation, whereas the word apartment would be used to describe a more luxurious space, which could also occupy single or multiple floors.

Houses generally favour families and those wanting private outdoor space, while apartments are popular with younger professionals who prefer to live closer to the inner city entertainment and social amenities. As we discuss in our Guide to Building a Profitable Property Portfolio, diversity is incredibly important to mitigate risk as values fluctuate, and having different property types and strategies in your portfolio means that if one type/strategy doesn't perform, the others can continue to provide an income until things change.

Investors and investment companies continue to put arguments for both property types, PropertyInvestorToday for example ran an article last year, 2024, detailing how terraced houses received more capital appreciation compared to apartments that year, you can read that article HERE, but capital appreciation is not the only metric investors should be interested in, with each having their own goals, and we will run through each option so you can make your own informed decision on what property type works for your personal requirements. Before we go into detail about the houses versus apartments debate, as mentioned, everyone has their own requirements, and you need to work out your investment priorities before investing. You can read more about that in our FREE Guide HERE.

Why should you invest in houses?

House prices in many cities have recently seen quite considerable growth which is in part due to the huge continual shortfall in housebuilding coupled with rising demand for more housing across the country. Houses also provide more ways to add value, by extending or converting the property, there are many ways to increase the potential price and desirability of your house. With smaller houses, depending on layout, you can add rooms, convert loft spaces, drop the curb and make areas for parking, with larger houses you can turn them into HMOs, or apartments, or even split the property to make two houses from one. This aspect of owning freehold houses with the added capital appreciation provides multiple potential growth streams, perfect for investment.

Lets firstly take a look at the type of tenants that would prefer living in a house over an apartment. With larger space both internally and externally generally provided by houses, you will find that they appeal to larger households, families, especially families with children, and professional couples with two vehicles, as many houses have off road parking and/or garages. Houses are also popular with housing associations for social housing needs, where the private space offered by a house, compared to apartments, is good for vulnerable tenants who require privacy.

Houses, on the whole, are normally freehold, which compared to leasehold, generally means less issues with legislation, lease terms, building management when letting out your property, as compared to the long list of potential issues with leasehold property, for example many leases do not allow short term lets, whereas with a freehold house, it is yours to basically let out how you want (there are exceptions such as Article 4 areas for HMOs). Owning the freehold means no ground rent payments, no lease renewals, generally no service charges.

When considering a property for investment, you have to seriously consider your typical tenant, who is your property/strategy aimed at? One thing when considering your target audience is affordability. Can your target audience afford the rent you need to charge in order for your investment to be successful. Houses in suburban areas tend to be cheaper than city centre apartments, and so for those tenants looking for value for money, space, and maximising their accommodation for their budget, houses will generally give them better value, this can widen your net for potential tenants, in turn meaning less time to rent, lower void periods, less tenant finding fees and the list goes on.

The same positives to owning a house for investment, can also be a negative, outdoor and external maintenance for example. Houses with gardens require constant upkeep, and if your tenant is not particularly green fingered then you might find yourself left with a jungle at the end of the tenancy. Older properties can bring their own problems, structural issues, out dated boilers or heating systems, poor wiring, failing double glazing, all of which will cost you money to correct. Obviously you can mitigate against these issues by buying newer properties, or make sure you build in a work float or maintenance fund when working out your investment figures, to ensure you have covered yourself for the unforeseen problems that could occur, it is better to be safe than sorry.

Houses, in general, tend to be more expensive than apartments, which will mean higher deposits, this year 2025, for example, the ONS Local House Price report for Manchester provided the following average property figures:

• Detached properties: £460,000

• Semi-detached properties: £314,000

• Terraced properties: £244,000

• Flats and maisonettes: £197,000

So, on average across Manchester, apartments were the cheaper property type, however we look at Salford for example, a new 2 bed apartment could cost you up to £335,000 compared to £175,000 for a terrace house within half a mile of each other.

Why should you invest in apartments?

Apartments are the more popular choice for developers in the city centres, as they can build more accommodation in a high rise building, thus maximising their potential income from sales, compared to the number of houses you could build on the same plot of land. So building up and providing potentially 100's of apartments and living space. So the most popular demand for accommodation in the city centres tend to be for apartments for young professional singles and couples, or even students, where they can be close to the jobs or university. When you also consider that young people will tend to rent rather than buy initially, then catering to the popular type of accommodation seems like a good investment strategy, there will always be young professionals living and working in the city. Younger people will tend not to need as much space as the older generation, so again, apartment living is appealing to them, they don't have the hassle of looking after a garden for example.

If we look at average yields then apartments tend to provide better average yields than that of houses, if we look at our example of the Manchester property types we considered before then the rental averages for Manchester were:

• Flats and maisonettes: £1,095

• Terraced properties: £1,333

• Semi-detached properties: £1,424

• Detached properties: £1,808

Which means the average yields of property types in Manchester, based on the average property prices are:

• Flats and maisonettes: 6.6%

• Terraced properties: 6.5%

• Semi-detached properties: 5.4%

• Detached properties: 4.7%

So in general terms apartments have more competitive rental yields compared to houses, and demand is strong for apartments.

Apartments have fewer requirements for maintenance, they tend to be smaller than houses, less that could go wrong, and the general maintenance of the communal areas and the main building is not the tenant or the apartment owners' responsibility. However, although owning a flat, reduces the responsibility of maintenance, especially for that of the entire building from the leaseholder, as the leaseholder, you will pay for that privilege, and service charges can significantly impact your rental income and overall profits. You will find that apartment blocks with lifts and other tenant-appealing facilities, such as swimming pools, gyms, and concierges, have increasingly higher service charges, in order to pay for the running of these extra amenities, ultimately this will impact your yield. These charges are not without merit though as they do pay for these added services, which can help to increase appeal and the rent level, but you have to be wary of these annual charges increasing.

Another issue can be the atual block management company looking after the overall running of the apartment block. There are many fantastic block management companies, however there are also very poor management companies, and there are stories, historically, of management companies not dealing with building issues which have caused problems for tenants and owners, sometimes irreparably.

Depending on the age of the apartment block you have to consider fire and safety regulations, with emphasis on things like the external cladding to the building, and the changes to rental legislation could potentially hamper your ability to get tenants.

The remaining time on a lease is important, and this can have an impact on your ability to get finance for the property, this in turn can hurt your ability to sell the property on.

Apartments have reduced ability to add value as well, with any future expansions and improvements have to be approved by the freeholder of the building.

There are limited strategies with apartments, and saturation can severely limit or harm your profits. With many city centres expanding what was once the shiny new apartment block, appealing to the new young professionals wanting to live in the city, quickly becomes yesterdays news, as new, more impressive apartment blocks are built. This can lead to a number of problems, firstly tenant turnover tends to be higher in apartments, as opposed to houses. Evidence shows the average younger tenant will stay in an apartment is around 1.3 years, compared to 5.7 years for a family living in a house. This will also increase your void periods to that of a house, and every void period is a period of no income.

With more apartments being built, as much as this shows demand, with it comes saturation this, over time, drives prices down - I have seen this in the short-term letting market in central Manchester, with overall yields decreasing year on year as occupancy levels began to decline.

Conclusion - So Houses or Apartments?

There is no right answer, and as we mentioned at the start a balanced property investment portfolio would have both houses and apartments, and it does depend on your own personal goals for investing, and the strategies you need to employ to achieve those goals.

That being said the overall positives for investing in houses tends to outweigh those for apartments, and so a suggestion would be to start with houses, and when budget allows and your portfolio grows you could add a few apartments to help balance it.

Looking at exit strategies, data recently released by Rightmove shows that property buyers in 2025 are favouring houses over apartments, as the search for more space is considered a premium requirement for many house hunters, especially since the COVID pandemic.

Larger houses have seen the biggest percentage in average price jump whereas flats and apartments have only seen a 7% increase.

Type of home	Average asking price	Five-year-asking price increase
Overall	£371,870	19%
Bungalow	£342,518	21%
Flat	£304,526	7%
Terraced House	£303,622	20%
Semi-Detached House	£326,918	23%
Detached House	£545,869	21%

Table from data provided by Rightmove.

So take into consideration the property you are buying for investment, and also the exit strategy, this might have an impact on the type of property you ultimately end up purchasing.

For more information on property investment strategies please read our in-depth guide on Building a Profitable Property Investment Portfolio