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What makes a more popular investment: units or houses?

In a recent blog  Tim Lawless from RPData  asked the question what makes a more popular investment and the answer was no surprise to me, but some of the statistics he came up with were fascinating.

Here’s what he said…

Nationally, 58% of flats, units and apartments are owned by investors. That is quite an amazing statistic, especially when you compare that with detached houses where only 21% are investor owned.

Across the capital cities the proportions are even higher. Darwin tops the list with 70.6% of all units being rented followed by Brisbane where 70.2% of all units are rented.

The lowest proportion, 60.3% in Sydney, is still significant. I would presume Sydney’s proportion is probably lower due to the city having the highest house prices (more owner occupiers choose units over houses thanks to the lower entry price), as well as the fact that Sydney is the most mature unit market in the country.

The high rate of investor ownership of apartments begs the inevitable question… why?

Similar to owner occupiers, it partly comes back to price points.

The unit market generally offers a lower buy in price (investors face affordability hurdles too!) than detached or semi-detached homes. Based on median selling prices across the combined capital cities over the June quarter, units are 12% or $59,000 more affordable than houses.

The gap is widest in Sydney where unit prices are almost 23% or $139,000 lower than house prices.

Yields are also important

Another valid reason is the fact that rental yields have historically been higher for units compared with houses.

The latest RP Data-Rismark indices show unit yields across the combined capital cities are currently at 4.9% compared with 4.2% for detached houses. In fact, across every capital city, rental yields on units are higher than yields for houses (except Darwin where both are at 6.1% which are the highest rental yields across the capital cities).

Finally, it is often the case that units are located in more popular locations for both renters and owner occupiers. The majority of unit developments are located close to transport networks, major working nodes and retail amenity.

The high proportion of investors really doesn’t come as a surprise!

Source: RPData



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'What makes a more popular investment: units or houses?' have 3 comments

  1. Avatar for Property Update

    August 20, 2012 @ 8:48 am Colleen

    Yes, but are they are better investment???

    Reply

    • Avatar for Property Update

      August 20, 2012 @ 8:54 am Michael Yardney

      Good question Colleen.
      Over the last few years well located established (not new or off the plan) apartments have had better capital growth and rental growth than houses in the same area.
      This seems to be related to affordability and changing lifestyle preferences

      Reply

  2. Avatar for Property Update

    August 20, 2012 @ 1:13 pm opinder singh

    Hi Michael..Great Article as always..
    So in other words Units/Apartments will always outperform better than houses as this tread of low maintenance and Life style preferences keeps on going..
    As houses are quite expensive within 15mins of CBD and apartments are more affordable in terms of Investment and PPOR..also less negative gearing too due to the fact of rental yields and less price than a house..
    Thanks Michael..great work keep it up

    Reply


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