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It's an important question for investors. Work through our checklist to help you decide whether a house or unit will get the best returns.

If you’re in the market for an investment property, one of the decisions is the choice between a house or an apartment. Let’s take a look at what to weigh up.


In any given location, apartments tend to be more affordable. Across Australia’s eight capital cities, the median apartment price in February 2016 was $480,000 compared with $572,000 for houses. This price gap varies considerably between cities and is widest in Canberra.

Gross yields

Apartments also tend to deliver higher gross rental yields (before costs) than houses. Units trump houses for rental yields in every state capital except Darwin according to data from RP Data in January 2016.

Maintenance costs

Apartments can have the upper hand when it comes to ease of maintenance but this can come at the cost of high strata levies.

Depreciation benefits

Depreciation is a highly prized tax deduction among investors. It represents the decline in the value of the property and its fittings and fixtures over time. But unlike, say, repairs or maintenance, depreciation doesn’t call for a cash outlay. A point in favour of apartments is that unit investors may be able to claim beefed-up depreciation costs for tax purposes. That’s because in most states each apartment owner can claim a stake of depreciation on common facilities such as tennis courts, lifts and common rooms. This can add up to valuable tax savings.

Capital growth

For many investors the litmus test for a good rental property investment is the likely long-term capital gain. Conventional wisdom says houses deliver better long-term gains than apartments due to the land component. In the decade spanning 2006 to 2016 houses in most state capitals have delivered superior capital gains. The notable exception is Darwin, where apartments have enjoyed a gain of 130%, eclipsing the 109.9% return on houses. This may not hold true across the board in the future as increasingly people prefer the low-maintenance lifestyle of an apartment and this is likely to support future price gains.

Is medium density the way forward?

Most Australians still live in detached houses, with only 24.5% of stock nationally comprising medium-density homes. However, there is a clear long-term trend towards higher-density living, which could bode well for investors. There are concerns this is leading to an oversupply of apartments.

What lenders want

No matter how good a house or apartment appears on paper, it will need to pass muster with lenders – and that’s becoming a lot harder for unit buyers in some cities. All lenders will have some restrictions on the type of property they can finance, with units tending to have more restrictions. To be fair, reservations can apply to certain houses too – in particular acreage or houses used for producing income or commercial purposes.

There are good reasons to consider an apartment but be sure to cast a critical eye over the number of new developments – high rise in particular – in, or planned for, the suburb you’re looking at. Check you have a reasonable deposit (20% is preferable among many lenders) and think about whether you’re prepared to hold onto the place for the long term. If you can tick all these boxes, you could be on the right track for a successful apartment rental. Otherwise, it could pay to stick with houses.

Nicola Field, a former chartered accountant, is a regular contributor to a number of successful magazines, including Money Magazine and Real Living. She is also the author of Baby or Bust: Financial Planning for New Parents and Parents-to-be.

This article is an excerpt from the Money magazine's special edition of the 2016 Real Estate Guide. To find out more, click here.