Houses grew a lot faster in value than units in the years following Covid. Suddenly, people had realized what their lives would look like if they had to spend a lot of time at home.

And working from home went from something that was a rare offering for most employees to becoming the norm.

Even several years later, a lot of workplaces are still seeing most employees spend at least half the week logging on from their dining table.

Add to this that the cash rate was super low during Covid, which allowed people to buy homes they may not have previously been able to afford to pay off, and it’s not surprising that house growth left units in the shade.

Now, economists are tipping a bit of a catch up in growth from units, while house markets in a number of areas enter a correction phase.

Each property and each market is unique of course, there is no guarantee houses will outperform units consistently, or vice versa. Let’s look at some of the other factors involved.

Strata levies and extras

One reason some investors believe buying a house is better than buying a unit, is that with a house, you don’t have to pay a strata levy.

And while this may be true, there are plenty of other ‘extras’ that people don’t always consider. With houses, you do have to pay a much greater land tax. You also have to pay for things like repairing driveways and gutters, which would be covered by strata if they were in a unit building. A house also costs you building insurance, while a townhouse or villa is generally covered within that strata payment.

The bonus that houses do have is they are more readily able to have value added to them via renovations, extensions or subdivision of the land.

Disproportionate returns

There are also pretty significant cashflow factors to think about. In affordable areas in lower price brackets, a house may cost $400,000 and be renting for $500 a week, while a townhouse may cost $250,000 and be renting for $450 a week. You’re paying almost double for the house that you would be for the townhouse, but you’re not receiving double the rent.

That’s because there are likely to be more renters in the market for the cheapest properties and the cheapest properties are units.

Does value growth stack up?

Houses are perceived to have more growth potential, but it may not always be the case. Houses do have the land attached that usually leads to the most value growth, but units are generally more affordable and can start at a low base. It’s not just rent, but also resale value where the most competition is at the most affordable end of the market, which can push prices up faster.

While a house may grow from $500,000 to $800,000, a unit could grow from $200,000 to $500,000 in the same period. Proportionately, that’s a better return.

The better cashflow generally offered by units can also mean the ability to leverage into additional investments faster and therefore begin creating more wealth.