Houses and Units
Units
A unit is what most people call an apartment in Australia, New Zealand, and the United Kingdom, and it is a self-contained sector of a structure that contains anywhere from four to thirty individual residences.
| Pros | Cons |
| Factors of lifestyle, such as closeness to work, cafes, and restaurants. | Many capital cities already have an oversupply of apartments, which makes finding tenants difficult and/or lowers rental income. |
| Because maintenance is handled by the corporate body, there is less time and effort required than with residences. | Strata and body corporate fees apply to units. |
| In many cases, units are less expensive than houses therefore, the entrance point is lower, with less of a deposit required. | Land appreciation does not help unit investors. |
Houses
All data suggest that homes generally accrue larger long-term capital gain than units.
For example, the capital gain for Sydney over the last 25 years amounts to a 7.6% annual growth rate for houses, whereas the annual growth rate for flats was 6.3%.
| Pros | Cons |
| Houses come with precious land ownership that always increases in value thus, both the land and the building themselves attract capital gain. | Older houses may have higher upkeep expenditures than apartments. However, building a new property necessitates little maintenance, and investors are eligible for depreciation tax incentives |
| Houses provide investors with the opportunity to boost appeal by making structural changes or building a whole new home, resulting in higher rent and overall capital gain. | Houses typically require larger deposits than apartments. This is based on geography, as regional houses are frequently less expensive than city units. |
Common Q and A
Does price matter when it comes to unit vs house?
Yes, price matters when choosing between a unit and a house. Generally, units are more affordable than houses, making them an attractive option for first-time investors.
What are the possible financial gains for apartments versus houses?
Historically, houses have shown more potential for capital gains compared to units because the price of a house includes both land and dwelling value.
How do units and houses differ in terms of rentability?
Houses may offer more capital growth potential, but units have a better prospect of being rented out. The demand for rental units is on the rise due to changing demographics and preferences for urban living. Units often generate higher rental yields compared to houses, making them attractive for generating rental income.
What is the cost of owning a unit versus owning a house?
The cost of ownership varies between units and houses. Houses come with council rates and land tax, which can vary based on the property’s value and land size. Units come with quarterly strata or body corporate fees, which can be higher in properties with many common facilities.
What about the ownership of units versus houses?
With houses, one has full control over the property, allowing upgrades and additions to increase its value. In contrast, with units, strata fees cover general upkeep and maintenance, and there is limited control over upgrades, making it challenging to add capital value independently.
What about depreciation, negative gearing, and other tax breaks for units versus houses?
- Units and houses get tax breaks like depreciation and negative gearing.
- Units with more shared assets (like pools) get bigger deductions.
- Houses are more likely to be negatively geared because they cost more upfront and rent for less.