For decades, the investment property conversation has been dominated by the idea that ‘houses always outperform units’. Yet, in today’s evolving market, demographic shifts, lifestyle preferences, and supply-side dynamics we are seeing that apartments still have their place and can play an important role in an investment portfolio.
Investors need to tread lightly, and understand when, where, what, and why they might make sense.
In cities like Sydney, Brisbane, Melbourne and Perth, apartments are now a substantial part of the housing stock, particularly in CBD suburbs. For some investors targeting inner-city renters or if you’re an entry-level investor with a limited budget, apartments can be a compelling option. But they come with a caution, because they are not without risks — and they certainly aren’t a “one size fits all” solution.
Investing in apartments isn’t for everyone and they have their hidden costs to consider with priority should be given to location and product quality more than ever.
First Things First: Apartment Demand Isn’t Going Away
When we think about Australia’s housing supply, apartments, particularly in metropolitan regions, make up a growing portion of available homes. There are good reasons for this:
Population growth and urbanisation means more people are living in cities where space is limited.
Lifestyle changes, especially among young professionals and downsizers, have boosted demand for low maintenance living close to work, services and transport.
Affordability pressures – for many aspiring owners and renters, apartments are a more affordable entry point than detached houses.
These factors help sustain demand for unit living, and rental demand, around major employment hubs and transport corridors.
However, while demand exists, the returns and risks of apartment investing vary widely depending on location, building quality and broader market conditions.
Pros of Investing in Apartments
Lower entry price – easier entry into hot markets
One of the most often-cited benefits of apartments is that they typically cost significantly less than detached houses in the same suburb.
Lower barrier to entry for first-time investors
Can allow you to invest closer to major employment or lifestyle hubs where houses are out of reach.
Less debt. May mean a smaller loan or greater borrowing capacity for a diversified portfolio.
Tighter market and tenant pool, in some locations. In apartment-dense suburbs — particularly those close to universities, business districts or transport nodes — demand can be strong, especially from young professionals, students (in certain precincts), short-term and executive tenants, and downsizers not ready to leave metropolitan areas.
A well-located apartment near a train station or CBD fringe is more likely to enjoy consistent rental demand.
Lower maintenance and landscaping costs. Shared maintenance costs covered by strata levies, and fewer external features that deteriorate over time.
While levies represent a cost, they do mean certain aspects of property upkeep are outsourced to professional managers, reducing the time burden on the investor.
Close to amenity and lifestyle can be a selling point. Modern apartments often include features that appeal to tenants and future buyers such as secure parking, gym or pool facilities, concierge or lift access, proximity to cafés, shops, and transport.
Risks of Apartment Investing
Despite their benefits, apartments also come with unique challenges that house investors don’t always face, and these must be weighed before writing an offer.
Higher ongoing costs
Unlike a house, apartments involve additional ongoing outlays. These costs can erode rental yield if not carefully anticipated, and they aren’t optional, even when you’re not living in the property.
Strata levies
Covering building insurance, common area maintenance, landscaping, lift servicing, pool & gym upkeep, and administrative costs.
Special levies
Unexpected costs for major repairs or upgrades (e.g., façade repairs or waterproofing).
Strata management fees
Which can rise over time.
Less land means potentially less capital growth
One persistent debate in property circles is whether apartments inherently appreciate slower than houses. Land scarcity drives a lot of capital growth — and apartments, by definition, share a title with others in the same block.
Oversupply kills returns
One of the most significant challenges for apartments is supply saturation. In suburbs where hundreds or thousands of new units have been delivered in recent years, competition for renters and future buyers can be intense, pushing down rental rates and future resale premiums.
Strata risks and building quality concerns
Apartment investing exposes you to strata governance and communal decision-making. Poorly run strata committees or badly maintained buildings can result in higher levies, hurt resale values, and create ongoing disputes that frustrate owners. Additionally, if the building has construction defects or design flaws, owners may face costly rectification processes or lengthy disputes with builders, insurers, or developers.
High-rise living carries unique challenges
High-rise buildings, typically defined as more than 8–10 storeys, come with their own set of risks, such as higher strata levies, longer evacuation and emergency procedures, perception issues (older Australians and retirees prefer low-rise living, potential safety concerns around building materials and balcony safety.
Additional Costs When Investing in Apartments
While many investors account for strata levies and mortgage payments, others overlook these ongoing or one-off costs that can catch you out and hurt your cash flow and profitability.
- Building and contents insurance (separate from strata insurance)
- Levy increases — levies can rise over time.
- Special levies for major works
- Sinking fund shortfalls — older buildings with underfunded sinking funds can require significant cash injections.
- Body corporate admin fees
- Marketing costs for tenants (if your property becomes vacant)
- Potential deferred maintenance or defects remediation
It is important that before you invest, you understand both the current and forecast levies and the health of the sinking fund, so you aren’t caught off guard with unexpected costs or special levies.
Competition and Saturation
One of the most important realities for investors is this:
Where there are many apartments, there is often more competition — both in rentals and in sales.
This is a simple supply-and-demand truth. Areas with large towers may have multiple units hitting the market at the same time, which can place downward pressure on rentals or resale values. This is where understanding product quality and diversity matters.
To overcome this risk, boutique apartment blocks can be considered a better investment. There are buildings that are typically no more than 3 stories because they are easier to manage and maintain, leading to lower levy costs. They tend to attract longer-term tenants seeking quieter, community-oriented living. They face less direct internal competition — fewer identical units vying for the same tenant or buyer, and are often located in desirable.
Should You Avoid Apartments Altogether?
The short answer is NO! — but only when the location, product, and financials make sense.
Apartments can be strong performers in a diversified investment portfolio, particularly when:
- You’re targeting tight markets with strong renters (professionals or students),
- You can afford levies with margin,
- The building is well-managed and structurally sound, and
- You’ve analysed rental demand trends and resale prospects.
If there’s one overarching insight from the apartment debate, it’s that location still matters more than property type. A small, well-run apartment in a high-demand location with limited competition can outperform a large house in a stagnant market.
But apartments also demand more active financial analysis. Investors must balance:
- Purchase price versus potential yield
- Levies and recurring costs
- Supply-and-demand trends in the suburb
- Building quality and management standards
- Tenant preferences and rental prospects
When chosen wisely, apartments can deliver stable cash flow, entry into desirable markets, and long-term capital growth. But like all investments, success depends on understanding the full picture — not just the list price.
