Don’t bet on (new) units to make you rich

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If you’re tempted to buy into the hype of a new unit development with the hope of making big bucks, you may want to reconsider your strategy according to a property analyst.
Eliza Owen of pointed out that despite the overall solid growth in values for Australia’s biggest cities, once you look closely, it’s clear that units have underperformed houses in a big way.
As such, investing in these types of properties is unlikely to give you the strong capital growth return that you get from established and detached houses.
According to the stats from, Sydney’s house values grew by 3.18% compared to unit’s 2.21% growth during the March quarter.
The disparity is even more pronounced in Melbourne where house values rose 3.11% while unit values fell by 0.8% during the same period.
“Despite Sydney displaying consistent growth across both markets, it’s still clear to see that there is a larger divergence in growth between the two different dwelling types,” Owen said.

“Melbourne has demonstrated the most interesting performance trend throughout March, with such a huge growth in its house market offset by a drop in its unit market.”
Owen warned that while there are exemptions to the rule, the new units being developed in Australia’s biggest capital cities may not give you the best capital growth returns.
“These growth rate figures raise questions regarding the longevity of a unit investment. In fact, I would argue that new units are a mal-investment of resources in the long term, because they are developed in response to speculative investment, rather than actual demand for accommodation,” she said.
Owen pointed out that although units will present as relatively affordable, “it is clear they do not produce higher capital growth returns, particularly now when the unit market is showing signs of oversupply.”
“Broadly speaking, both Sydney and Melbourne might be coming to a position of oversupply,” Owen added. “I also think that the nature of units being developed in Sydney and Melbourne is not necessarily very high quality. They will have the potential of providing lower living standards for tenants. That means that as the market fluctuates, the new units would become less desirable and retain less value than property with higher quality. “
Graph: Houses vs units


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  • Zero Hedger says on 07/05/2015 10:40:13 PM

    This article is as helpful as tits on a bull.

    New units are low investment value because they are SO EXPENSIVE for the rental return! duh..... genius is the one pointing this out! lol.

    New units are made for the chinese investor trying to get their money out of china before the bubble pops there! thats why they are overpriced. Couple this with the lunatic government/councils approving developments like its going out of fashion and you have a recipe for importing a "fake economic" recovery. But it will be short lived and run out of steam sooner rather than later.....and all suckers who got sold down the property road to riches will be left high and dry; Defaulting and wondering where that agent that hyped the sales up and the property experts touting the wonders of property! lol.....

  • Jim says on 08/05/2015 02:40:09 AM

    Don't know how helpful are tits on a bull.
    Capital growth aside, taking into account depreciation, units have far higher rent return than houses which have a gross return as miserable as 2.5%. Anyway spuikers are still flogging property "investment", many will end in tears.

  • Frank says on 08/05/2015 06:42:33 PM

    I think Margaret Lomas in one of her property investment books has suggested that both houses and units tend to average out the same in the end.

    Houses tend to have lower rent yields but higher capital growth.
    Units tend to have higher rent yields but lower capital growth.

    I track my investment returns totalling net rent estimated capital growth based on recent sales.

    In the same suburb I have an old house which has returned me an average of 20%pa over the last 10 years - and 3 units that have returned variously 9, 15 & 43%pa over the same period. So - units doing better and worse than a house.

    Of course if you are suckered into an off-the-plan new unit investment that goes bad, I can't help you - they're a bit of a gamble - some win, some lose.

    New units tend to suit people on high income who want set and forget investments with low maintenance.
    Old houses tend to suit DIY active renovators who want to get their hands dirty and earn capital gains.

    Swings and roundabouts - in the end - we're all dead.

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