Unit vs House: Which Property Type Holds Better Long-Term Value

Unit vs House: Which Property Type Holds Better Long-Term Value

If you are planning to buy in Australia’s property market, you have probably asked yourself one of the most common questions among homebuyers and investors: should you buy a house or a unit? It sounds simple, but choosing between the two can influence your long-term capital growth, the type of tenant you attract, your borrowing power and even your ability to build a property portfolio later.

There is no one-size-fits-all answer. Instead, the better choice depends on your budget, your goals and the type of property performance you want over time. At RateSeeker, we see this decision play out with clients every day. Some buyers prioritise land value above all else. Others want lower entry prices and higher rental yields. Many simply want to get into the market as quickly as possible without overextending themselves.

This guide breaks down how houses and units perform over the long term, what drives value for each, and which option might make more sense for your goals as a buyer or investor.

Why the House vs Unit Debate Continues

Australian property is unique. Our population is growing quickly, our cities are expanding, and land has become more difficult for developers to acquire in popular metropolitan areas. At the same time, demand for low-maintenance living and more affordable entry points has driven new interest in units and apartments.

This creates an interesting dynamic. Houses, supported by scarce land, typically show stronger long-term capital growth. Units, however, can offer higher rental yields and lower upfront costs, making them appealing for first-home buyers and investors seeking cash flow.

Understanding this relationship is the first step in choosing the right path for you.

How Capital Growth Differs Between Houses and Units

Long-term value is primarily driven by capital growth. That means looking beyond what the property costs today and focusing on how it is likely to perform over ten, twenty or even thirty years.

The Land Component Advantage for Houses

When you buy a house, you are buying the dwelling and the land it sits on. Since land is finite and cannot be replicated, its value tends to grow faster over time. This is a major reason houses outperform units in capital growth across most suburbs.

Land scarcity, zoning restrictions and high demand for standalone homes all drive this. Even if the house itself depreciates, the land typically appreciates, and that appreciation often outpaces unit growth.

If your long-term strategy focuses on strong capital gains, a house will usually put you in a stronger position.

Why Units Grow More Slowly

Units do grow in value, but not at the same rate, because they contain little or no land component. Instead, you are purchasing air space within a larger building. Since developers can continue building more units in a suburb, the supply is rarely as limited as house supply.

More supply usually means slower price growth. That said, well-located boutique units with fewer apartments and higher owner-occupier demand can still perform strongly. The key is to avoid high-density blocks that flood the market with new supply.

When Units Can Outperform Houses

While houses have the upper hand in long-term capital growth, units can outperform in certain situations, especially when:

• The suburb is tightly held with limited new development
• The unit block is small and well-maintained
• The location is close to public transport, universities or major employment hubs
• Borrowers want to maximise cash flow
• Investors buy early in a suburb undergoing major infrastructure upgrades

In other words, not all units are equal. The right unit in the right block in the right suburb can offer excellent long-term value.

Rental Yield: The Cash Flow Advantage of Units

Rental yield is another major factor that influences long-term investment performance. While houses may offer superior capital growth, units often deliver stronger rental yields.

Why Units Typically Yield More

Units cost less to buy but often deliver similar rental income compared with nearby houses. This improves your rental yield and makes units attractive if you want stronger cash flow.

For example:

• A house may cost 1.1 million and rent for 700 per week
• A unit may cost 620 thousand and rent for 520 per week

The unit generates a higher return relative to its purchase price. For investors focused on cash flow rather than capital appreciation, this can be a compelling benefit.

Houses Can Still Deliver Solid Yields with the Right Strategy

Houses in regional areas, outer-ring suburbs or growth corridors can still produce healthy yields. Dual occupancy designs, granny flats or multi-income properties can significantly boost returns.

If you prioritise both yield and capital growth, a house with multiple income streams may be the best of both worlds.

Maintenance, Fees and Ongoing Costs

A property’s long-term value is affected not only by its appreciation but also by its ongoing costs.

Units Have Lower Maintenance But Higher Fees

Units tend to cost less to maintain because the owners’ corporation manages the building’s structure, common areas and external maintenance. However, this comes with strata fees, which can range from low to extremely high depending on the amenities and the building’s condition.

High strata fees can eat into your rental yield and reduce the long-term financial benefit of the property.

Houses Offer More Control but More Responsibility

With a house, you are responsible for all repairs, landscaping, structural issues and upgrades. This gives you full control but also full financial responsibility.

However, well-planned renovations can significantly increase the value of a house, while renovating a unit is more limited.

How Lifestyle Trends Are Shaping the Market

Property value is shaped by demand, and demand is shaped by how Australians want to live.

Demand for Units Is Rising Among Younger Buyers

Younger buyers, downsizers and city professionals often prioritise convenience, location and affordability over backyard space. This shift has increased competition for well-located units in inner and middle-ring suburbs.

While this demand may not erase the growth gap between houses and units, it does support stronger long-term stability for units than in previous decades.

Family Buyers Still Prioritise Houses

Families prioritise space, privacy and access to schools and parks. These are strong drivers for house demand, which underpins long-term price growth in family-friendly suburbs.

As long as this demographic remains strong, houses will continue to outperform units in most markets.

Affordability and Borrowing Power Considerations

Your borrowing capacity plays a major role in whether a house or a unit is the better long-term investment for you.

Units Offer a Lower Entry Point

Units are often the only feasible option for first homebuyers in Sydney or Melbourne. Getting into the market sooner can produce strong long-term results, even if a house may have grown more in value.

Buying a unit today may allow you to build equity that you can later use to upgrade to a house.

Houses Require More Borrowing Power

Because houses are more expensive, they require higher deposits and higher borrowing limits. If your income or savings are not yet at that level, a unit may help you enter the market without financial strain.

A common strategy is to buy a well-located unit first, grow equity, then refinance and purchase a house later.

Long-Term Strategy Matters Most

The question of houses versus units becomes clearer when tied to your strategy.

Buy a House If Your Focus Is:

• Maximum long-term capital growth
• Wealth building over several property cycles
• Having control over the land and improvements
• Renovation potential
• Entering a family home early

Buy a Unit If Your Focus Is:

• Lower entry price
• Higher rental yields
• Owning a property in a premium or inner-city location
• Minimal maintenance
• Entering the market sooner
• Building equity for a future upgrade

There is no right or wrong choice. There is only one choice that best suits your goals and borrowing power today.

What We See at RateSeeker

Because we work with buyers and investors at all stages, we see both sides of this debate in real time. Clients who opt for houses often do so because they want long-term growth and more control over their property. Those who choose units value affordability, location and better cash flow.

We also see many buyers start with a unit and eventually leverage that equity to purchase a house later. This pathway has helped countless clients enter the market years earlier than they expected.

Ultimately, choosing the right property type starts with understanding your borrowing capacity and mapping your goals against where the market is heading.

Final Thoughts

The long-term value of a house versus a unit depends entirely on what you want to achieve. Houses generally offer stronger capital growth due to land value, while units provide lower upfront costs and higher yields.

Your financial situation, lifestyle priorities and investment strategy will be key factors in choosing between the two. What matters most is getting into the market sooner rather than spending years trying to time the perfect moment.If you would like personalised guidance on your borrowing power, strategy or loan structure, our team can help you compare lenders and secure the right loan for your property goals. Talk to our experts now!