Apartment gains safer than houses
The property research company RP Data said that while capital-city unit prices grew by an annual average return of 2.9 per cent over the five years to December 31, house prices grew by only 1.8 per cent.
An RP Data senior research analyst, Cameron Kusher, said over the very long term, house prices had outperformed units but the reversal in the trend over the past five years was explained by several factors.
"Affordability is a key factor, particularly in a market like Sydney where the median house price is about $165,000 more expensive than the median unit price," Mr Kusher said. "Many people still aspire to live in a detached home but the reality for many is that units are a better option."
Owner-occupiers in units can live closer to the city centre, whereas for the same price for a detached house they would have to live further out.
Investors were also able to achieve higher rental yields on units than with houses. Mr Kusher said the gross rental yield on capital city houses was 4.2 per cent and 4.9 per cent for units.
However, there is a marked difference in relative price performance between houses and units in the two biggest property markets of Sydney and Melbourne.
In Sydney, units have clearly outperformed houses. The average annual price growth for Sydney houses over the past five years is 2.7 per cent and 3.6 per cent for units.
But in Melbourne, where there is an oversupply of units, the gap is smaller. Melbourne house prices show average growth of 3.3 per cent compared with 3.9 per cent for units.
There was still a lot of supply to come on, particularly in Docklands and Southbank, Mr Kusher said. "It will be interesting to see if, over the next few years, given that there are concerns about an oversupply of units, the outperformance of Melbourne's unit market holds."
Frequently Asked Questions about this Article…
According to RP Data, apartments (units) have outperformed houses over the past five years — unit prices grew 1.1 percentage points more per year than house prices, equal to a total advantage of about 5.62 percentage points over that five-year period.
RP Data reported that, over the five years to December 31, capital-city unit prices returned an average 2.9% per year, while capital-city house prices returned an average 1.8% per year.
RP Data senior research analyst Cameron Kusher cites affordability and location as key reasons: units tend to be cheaper than detached houses (so more buyers can afford them) and allow owner-occupiers to live closer to city centres. Investors also see higher rental yields on units, which has supported demand.
The article states gross rental yields for capital-city properties were about 4.9% for units and 4.2% for houses, meaning units were delivering higher rental income relative to price.
No. In Sydney units clearly outperformed houses — average annual growth was about 3.6% for units versus 2.7% for houses. In Melbourne the gap was smaller: units averaged 3.9% and houses 3.3%, with Melbourne showing signs of an oversupply of units in some precincts.
The article highlights concerns about an oversupply of units in parts of Melbourne (especially Docklands and Southbank). RP Data notes it will be important to watch whether Melbourne’s recent unit outperformance holds as this new supply comes on the market.
Affordability is a major factor: RP Data notes the median house price in markets like Sydney can be around $165,000 higher than the median unit price, making units a more realistic option for many buyers and investors who want proximity to the city or stronger rental returns.
The article suggests everyday investors should consider local market dynamics (city vs suburb), rental yields, and future supply. While units have outperformed in the last five years, RP Data also points out that houses have historically done better long term, so investors should weigh location, affordability and incoming supply when choosing between units and houses.
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