The age-old debate in Australian property investment has resurfaced: will units outperform houses?
Lately, there’s been a flurry of headlines and commentary suggesting units are about to outpace houses in capital growth. At Sound Property, we believe it’s essential to go beyond the hype and focus on the long-term data that drives strategic investment decisions.
The Long Game: Houses Outperform Over Time
While units can go through short-term periods of “catch-up” growth, especially when housing prices have surged and affordability is stretched, the long-term data tells a different story.
Over the past 25 years, houses have consistently delivered stronger capital growth than units. Nationally, the average annual capital growth for houses has ranged between 8-9%, compared to approximately 6% for units. That 2-3% difference, compounded over decades, can significantly impact the overall return of an investment portfolio.
At Sound Property, our 25-year suburb-level data reinforces this trend across most capital cities and investment-grade suburbs. In many cases, houses have outperformed units by hundreds of thousands of dollars over the long term.
Why the Gap?
There are several structural reasons for the performance gap:
– Scarcity: Houses sit on land, which is a finite resource. As cities grow, well-located land becomes more valuable.
– Control and Flexibility: Investors have more control over a house than a strata-titled unit, with fewer restrictions and ongoing costs.
– Supply Risk: Units are far easier to oversupply, especially in inner-city areas where high-rise developments can flood the market quickly. Oversupply dampens both rental yields and capital growth.
Units Have Their Place – But Context Matters
None of this is to say that units don’t have a place in a balanced investment strategy. In select locations, particularly lifestyle or downsizer-friendly suburbs with limited new development, units can offer solid returns and rental demand.
However, the blanket idea that “units will now outperform houses” is narrow thinking. It ignores the inherent risks and long-term performance data. As always, context, suburb selection, and supply-demand dynamics matter far more than media soundbites.
The Sound Property Approach
Our investment philosophy is grounded in over 25 years of suburb-level data, identifying areas that consistently deliver above-average returns. While market conditions change, the fundamentals of smart investing remain the same: supply constraints, population growth, infrastructure, and owner-occupier appeal.
So before jumping on the latest trend, take a step back and look at the full picture. In property, long-term thinking beats short-term noise every time.
If you’re interested in exploring data-driven opportunities tailored to your goals, get in touch with our team at Sound Property.