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August 2013

Houses vs Units
By Bernie Tynes

Just about everyone has an opinion on the age old question of ‘Houses vs. Units’’ but which is the better investment?

Many investors believe that houses are a better investment because of the value in the land as land appreciates over time as the dwelling depreciates. Historically this is true however as more and more investors and renters are choosing to live closer to the city centre and opting for units, the landscape is changing.

According to the latest rental report from Australian Property Monitors, units are now providing comparable rental returns to houses. In Sydney, the median rent for a unit is $470 per week vs a house which is just under $500 per week.

In Melbourne, the median rent for a unit is now the same as for a house at $360 per week.

In terms of growth in value, units are also proving to be a better investment than houses. According to property researcher RP Data, Australian capital city unit prices grew by an annual average return of 2.9 per cent over the past five years (up to Dec 31, 2012) whereas house prices only grew by 1.8 per cent.

Over the long term, house prices had actually outperformed units; however the trend over the past five years shows that units were generating stronger returns.

In Sydney the average annual price growth for houses over the past five years was 2.7 per cent vs. 3.6 per cent for units.

In Melbourne, where there is an oversupply of units, house prices grew by annual rate of 3.3 per cent vs. 3.9 per cent for units.

One of the main factors investors are choosing units over houses was down to affordability as owner-occupiers can live closer to the city, whereas for the same price for a house they would have to live further out. The latest RP data research shows that the average Sydney house costs $620,000 vs. the average unit which costs $488,000. Therefore houses in Sydney actually cost 27% more to buy yet they only generate 6% more rent.

Units also require less maintenance as the care of the building and surrounds is covered by the body corporate which suits many investors.

All signs suggest that over the coming years, we’ll start to see a growing number of Australians living in units closer to the city. At Infinity property we specialise in units throughout Sydney, so if you are thinking of buying a unit or leasing your property, please call us today.