Choosing the right property type is one of the most important decisions you'll make as an investor. Houses, units, and townhouses each offer different advantages and challenges in terms of capital growth, rental yield, maintenance costs, and tenant appeal. Understanding these differences will help you select properties that align with your investment strategy and risk tolerance.
Understanding the Property Type Landscape
In Australia's property market, the main investment options are:
- Houses: Detached homes on their own land
- Units/Apartments: Individual dwellings within multi-unit buildings
- Townhouses: Multi-level homes sharing walls with neighbours
- Villas: Single-level homes in small complexes
- Duplexes: Two attached homes on a single title
Each type has distinct characteristics that affect their performance as investments, from purchase prices and ongoing costs to growth potential and tenant demographics.
Market Share in Australia (2025)
- Houses: ~75% of all residential properties
- Units/Apartments: ~20% of all properties
- Townhouses/Other: ~5% of all properties
However, in inner-city areas, units can represent 40-60% of available properties
Houses: The Traditional Choice
Detached houses remain the preferred choice for many Australian investors and owner-occupiers:
Advantages of Houses
- Land ownership: You own both the building and the land underneath
- Capital growth potential: Historically stronger long-term growth
- Privacy and space: More appealing to families and long-term tenants
- Control: Complete control over renovations and improvements
- No strata fees: Avoid ongoing body corporate costs
- Broader tenant appeal: Attracts families, professionals, and sharers
Disadvantages of Houses
- Higher purchase prices: Generally more expensive to buy
- Lower rental yields: Typically 3-5% gross yield
- Full maintenance responsibility: All repairs and upkeep are your cost
- Location limitations: Less available in prime inner-city locations
- Higher entry barriers: Require larger deposits and borrowing capacity
Best Suited For:
- Investors focused on long-term capital growth
- Those who can afford higher purchase prices
- Investors wanting full control over their asset
- Markets where houses significantly outperform units
House Investment Example - Outer Brisbane
Property Details:
- Purchase price: $520,000
- Weekly rent: $480 (4.8% gross yield)
- Land size: 450sqm
- Age: 15 years old
Annual Costs:
- Council rates: $1,800
- Insurance: $1,200
- Maintenance: $2,500
- Property management: $1,500
Net yield: 3.5%
Units and Apartments: Urban Accessibility
Units and apartments offer a different investment proposition, particularly in urban areas:
Advantages of Units
- Lower entry prices: More affordable entry point for investors
- Better locations: Often closer to CBDs, transport, and amenities
- Higher rental yields: Typically 4-7% gross yields
- Shared maintenance: Building maintenance handled by body corporate
- Security features: Often more secure than houses
- Professional management: Building management in place
Disadvantages of Units
- Strata fees: Ongoing body corporate levies ($2,000-$8,000+ annually)
- Limited control: Restrictions on renovations and modifications
- Slower capital growth: Historically weaker growth than houses
- Oversupply risk: More susceptible to new supply in apartment towers
- Special assessments: Unexpected costs for major building repairs
- Body corporate politics: Decisions made by committee
Best Suited For:
- First-time investors with limited capital
- Those prioritising rental yield over growth
- Investors wanting prime locations at lower cost
- Those preferring shared maintenance responsibility
Unit Investment Example - Inner Melbourne
Property Details:
- Purchase price: $450,000
- Weekly rent: $420 (4.85% gross yield)
- Size: 65sqm, 2 bed/1 bath
- Age: 8 years old
Annual Costs:
- Strata fees: $3,200
- Council rates: $1,400
- Insurance: $600
- Maintenance: $800
- Property management: $1,300
Net yield: 3.2%
Townhouses: The Middle Ground
Townhouses attempt to combine the best features of houses and units:
Advantages of Townhouses
- More space than units: Often 2-3 levels with courtyards
- Some land ownership: Small private outdoor areas
- Better than units for families: More space and privacy
- Shared maintenance: External maintenance often covered
- Good locations: Often in established suburbs
- Growing market: Increasing popularity with developers and buyers
Disadvantages of Townhouses
- Body corporate fees: Usually lower than units but still present
- Some restrictions: Covenant rules on modifications
- Shared walls: Potential noise and privacy issues
- Limited supply: Fewer options in many markets
- Mixed growth record: Variable performance across different markets
Best Suited For:
- Investors wanting space without full house prices
- Those targeting families as tenants
- Markets where townhouses have proven growth records
- Investors comfortable with moderate body corporate involvement
Rental Demand and Tenant Preferences
Different property types attract different tenant demographics:
House Tenants
- Families: Space for children, pets, storage
- Professionals: Home offices, privacy, parking
- Share households: Multiple bedrooms and living areas
- Longer tenancies: Families tend to stay longer
Unit Tenants
- Young professionals: Convenience, location, lifestyle
- Couples without children: Easy maintenance, security
- Students: Close to universities and transport
- Downsizers: Older tenants wanting low maintenance
Townhouse Tenants
- Small families: More space than units, lower cost than houses
- Professional couples: Space for home offices
- Empty nesters: Downsizing but wanting some space
Vacancy Rates by Property Type (2025 Average)
- Houses: 2.1% vacancy rate
- Units: 2.8% vacancy rate
- Townhouses: 2.4% vacancy rate
Houses typically have the lowest vacancy rates due to limited supply and high demand from families
Capital Growth Performance
Historical data shows significant differences in capital growth between property types:
Long-Term Growth Trends (20-Year Average)
- Houses: 7.2% annual growth
- Units: 5.8% annual growth
- Townhouses: 6.5% annual growth
Why Houses Typically Outperform
- Land component: Land appreciates, buildings depreciate
- Limited supply: Fixed land supply in established areas
- Broader appeal: Attracts both investors and owner-occupiers
- Renovation potential: Easier to add value through improvements
When Units Can Outperform
- Prime locations: Inner-city areas with limited new supply
- Transport nodes: Near major transport infrastructure
- Amenity-rich areas: Close to beaches, parks, entertainment
- Demographic shifts: Areas becoming more dense and urban
New vs Established Units
New off-the-plan units carry additional risks including construction delays, defects, oversupply, and the "new property premium" that can result in immediate value loss. Established units with proven rental history often provide better investment fundamentals.
Maintenance and Ongoing Costs
Ongoing costs vary significantly between property types:
House Maintenance Costs
- Structural: Roof, gutters, external walls
- Gardens: Landscaping, lawn care, tree maintenance
- Systems: Hot water, electrical, plumbing
- Annual budget: 1-2% of property value
Unit Ongoing Costs
- Strata levies: $2,000-$8,000+ annually
- Special assessments: Unexpected major repairs
- Internal maintenance: Fixtures, fittings, appliances
- Annual budget: Levies plus 0.5-1% for internal items
Understanding Strata Fees
Strata fees cover:
- Administrative costs: Management, insurance, accounting
- Maintenance: Common areas, lifts, pools, gardens
- Sinking fund: Future major repairs and renovations
- Utilities: Common area electricity, water
Location and Property Type Interactions
The suitability of different property types varies significantly by location:
Inner City Areas
- Units dominate: Higher density, better yields
- Houses are premium: Limited supply, strong growth
- Townhouses emerging: New developments for families
Middle Ring Suburbs
- Mixed housing: All types commonly available
- Houses preferred: Better growth, family appeal
- Units competitive: Good yields, transport access
Outer Suburbs
- Houses predominant: Land is more affordable
- Units less common: Lower density development
- New estates: Mix of house and townhouse developments
Investment Strategy Alignment
Different property types suit different investment strategies:
Capital Growth Strategy
- First choice: Houses in established suburbs
- Alternative: Unique units in tightly held buildings
- Focus: Land component, scarcity, broad appeal
Cash Flow Strategy
- First choice: Units in high-demand rental areas
- Alternative: Houses in affordable regional centres
- Focus: High yields, strong rental demand
Balanced Strategy
- Mixed portfolio: Combination of houses and units
- Geographic spread: Different locations and markets
- Risk management: Diversification across property types
Portfolio Diversification Example
Sarah's 4-Property Portfolio:
- 2 × Houses (outer Brisbane) - Capital growth focus
- 1 × Inner-city unit (Melbourne) - Balanced growth/yield
- 1 × Regional house (Toowoomba) - Cash flow focus
This provides exposure to different markets, property types, and investment outcomes
Due Diligence for Different Property Types
Each property type requires specific due diligence considerations:
House Due Diligence
- Land size and zoning: Development potential and restrictions
- Building condition: Structural, roof, electrical, plumbing
- Neighbourhood character: Consistency and future development
- Council approvals: Recent DA approvals for nearby development
Unit Due Diligence
- Strata report: Building condition, finances, management
- Body corporate minutes: Ongoing issues and disputes
- Building age and maintenance: Upcoming major works
- Rental pool: Similar units and rental rates
Townhouse Due Diligence
- Community title documentation: Rules and restrictions
- Common area maintenance: Costs and responsibilities
- Neighbour relationships: Shared wall considerations
- Future development: Potential for surrounding development
Financing Differences
Lenders may have different requirements for different property types:
Houses
- Standard lending: Minimal restrictions
- Best rates: Lowest risk category
- High LVR: Can often borrow up to 95% (with LMI)
Units
- Building restrictions: Some lenders avoid certain buildings
- Size minimums: Usually 50sqm+ required
- New unit restrictions: Lower LVRs for off-the-plan
Townhouses
- Case-by-case: Assessed individually
- Documentation: Community title complexity
- Market acceptance: Growing lender acceptance
The Bottom Line on Property Types
There's no universally "best" property type - success depends on matching the property type to your strategy, budget, and market conditions. Houses typically offer better long-term growth, units can provide better yields and locations, while townhouses attempt to balance both benefits.