Houses vs Units: Which is better for capital growth
Updated: Sep 30
It's one of the most common questions in property investment: do houses or units deliver better capital growth?
Over the last 20 years, houses have generally outperformed units, and capital cities have generally outperformed regional areas. But the reason why comes down to something more fundamental than the property type itself: land to asset ratio.
Why Houses Tend to Outperform
A house typically carries a higher land to asset ratio, meaning a greater proportion of its value sits in the land rather than the dwelling. Land is what appreciates over time, while buildings depreciate. This is the core reason houses have historically delivered stronger capital growth than units, where a much larger share of the purchase price is tied up in the dwelling itself rather than the land beneath it.
This doesn't mean units can't perform well. It means their growth potential is more closely tied to scarcity of land and location, since the individual owner has a much smaller land holding to benefit from. This principle also explains why house and land packages and off-the-plan purchases can be some of the weakest performers of all, since a much lower proportion of the price is attributed to land.
Capital Cities vs Regional Areas
Capital cities have generally shown more volatile growth than regional areas, with bigger swings in both directions. Regional markets tend to be more stable, though this stability can also mean more modest long-term growth. It's also worth noting that these averages only tell the full story if you hold for the long term, closer to 30 years. If you need to sell during a downturn, you're more exposed to short-term fluctuations regardless of whether you own a house or a unit.
When Units Can Perform Well
There are exceptions where units have kept pace with or even outperformed houses, and it usually comes down to one thing: urban renewal. Where an area has gone through significant redevelopment, new higher-density housing near transport, employment and lifestyle amenities, unit values can see a meaningful uplift, distorting the usual pattern.
This is worth keeping in mind if you're comparing data across suburbs, since a spike in unit growth might reflect a wave of new construction more than genuine capital appreciation of comparable stock.
What This Means for Your Strategy
If capital growth is your priority, understanding a property's land to asset ratio is more useful than simply choosing "house" or "unit" as a category. A well located unit with genuine land scarcity can outperform a poorly located house on a fringe estate.
It's also worth remembering that land to asset ratio is only one part of the equation. Your personal strategy, whether you're prioritising yield, growth or a balance of both, should guide your decision just as much as the averages. If you're weighing up whether size matters when it comes to land, our blog on Does Land Size Matter? goes into more depth.
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Need a hand?
If you're weighing up houses versus units, or capital cities versus regional areas, and want to know what actually applies to your situation rather than the averages, reach out to us.
The data shows big differences between cities, and even between individual suburbs, so getting the right guidance for your personal economy matters.
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