There’s an old property investing cliché in Australia…houses grow in value, but units don’t. 

The belief is that while units attract a decent rental return, Aussies will always want to buy houses, so there’s an extra layer of demand and competition that will push values up long term. 

The theory rang true during the Covid period and the growth boom that followed. House value growth was as much as triple that of units in some areas. 

Now, however, the tables seem to have turned. Units are playing catch up. 

A new report by PropTrack has revealed buyers now need at least $1.5 million to afford the majority of new units being built in Australia. 

Building costs, excessive taxes, inflation and global supply chains keep getting more difficult, which is making it harder and harder to create sufficient supply of property. So, those investors who have units or can buy in now, are well placed for growth if they invest wisely. 

B Invested clients are making plenty of inquiries about units at the moment. We know there’s growth potential there, but what else is there to consider? 

Serviceability 

Borrowing capacity is currently very important for investors, as rates rise, inflation carries on and overseas conflict means nothing is certain. 

Houses, particularly in capital cities, come with significantly higher price tags. That means larger loans, higher repayments, and a heavier impact on borrowing capacity. 

Units typically require smaller loans and often deliver stronger rental yields. That improved cash flow can make a meaningful difference when lenders assess your ability to hold not just one property, but potentially multiple. In a tighter lending environment, an investor might secure two well-performing units instead of stretching for a single house. 

Affordability 

The entry price for houses in Australia’s major markets has surged to the point where many investors are priced out entirely. Apartments offer a lower barrier to entry, allowing investors to get into the market sooner, rather than waiting years to accumulate a larger deposit. 

Getting in earlier means more time in the market and access to extra growth cycles. Waiting on the sideline can mean the goal posts move again and investment gets further out of reach. 

 Return on investment 

ROI could be the most misunderstood metric in the house v units debate. 

Some investors focus solely on capital growth without considering the full picture. ROI should incorporate both capital growth and income, relative to the money you’ve actually outlaid. 

 A house might deliver stronger headline growth over a decade, but if it comes with lower yield and higher holding costs, the overall return may not be as good as you thought. 

Apartments, particularly in supply-constrained areas, can offer a great balance. Higher yields can mean a positive cash flow and you can use leverage to expand your portfolio. 

Before you know it, the overall ROI looks much better than if you only consider capital growth. 

Risk 

Houses often benefit from the value of the land they’re on, and the scarcity of available land elsewhere. This underpins long term growth. 

But where’s the spreading of risk? All your exposure is in one asset, one location and one price point. 

Buying multiple units creates diversification, spreading risk across multiple properties, market segments, and geographical locations. 

Of course, while we’re on risk, it’s important to recognise some units are riskier than others. Oversupplied high-rise developments can underperform. Just ask anyone who has owned in the Melbourne CBD over the last decade or so. Meanwhile, boutique blocks in established suburbs with limited new supply can behave very differently. 

Look at the individual asset 

Whether you want to invest in houses or units, the fundamentals will always still apply.  What matters the most is the specific property, its location, its purchase price, its rental income, its upside for improved performance and, of course, whether it fits within your strategy.