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What makes for the more popular investment: units or houses?

Posted by Tim Lawless, RPData - Research Blog on 30 October 2014

Nationally, 58% of flats, units and apartments are owned by investors. That is quite an amazing statistic, especially when you compare that with detached houses where only 21% are investor owned.
Across the capital cities the proportions are even higher. Darwin tops the list with 70.6% of all units being rented followed by Brisbane where 70.2% of all units are rented.

The lowest proportion, 60.3% in Sydney, is still significant. I would presume Sydney’s proportion is probably lower due to the city having the highest house prices (more owner occupiers choose units over houses thanks to the lower entry price), as well as the fact that Sydney is the most mature unit market in the country.

The high rate of investor ownership of apartments begs the inevitable question… why?

Similar to owner occupiers, it partly comes back to price points. The unit market generally offers a lower buy in price (investors face affordability hurdles too!) than detached or semi-detached homes. Based on median selling prices across the combined capital cities over the June quarter, units are 12% or $59,000 more affordable than houses. The gap in Brisbane is 16% lower median price for units than houses.

Another valid reason is the fact that rental yields have historically been higher for units compared with houses. The latest RP Data-Rismark indices show unit yields across the combined capital cities are currently at 4.9% compared with 4.2% for detached houses. In fact, across every capital city, rental yields on units are higher than yields for houses (except Darwin where both are at 6.1% which are the highest rental yields across the capital cities).

Finally, it is often the case that units are located in more popular locations for both renters and owner occupiers. The majority of unit developments are located close to transport networks, major working nodes and retail amenity.

The high proportion of investors really doesn’t come as a surprise!

 

Author: Tim Lawless, RPData - Research Blog
Tags: RP Data

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