HIGH-RISE APARTMENTS VS HOUSES: WHICH INVESTMENT COMES OUT ON TOP?
As Australia accelerates apartment construction, investors face a critical decision between high-rise living and land-backed homes.
3 min
Australia’s housing shortage has long positioned real estate as a cornerstone of wealth creation. But as governments push to deliver 1.2 million new homes, many of them high-rise apartments, investors are increasingly weighing whether vertical living offers the same long-term returns as traditional houses.
While apartments offer lower entry prices and strong rental demand in key locations, critics warn that strata costs, oversupply and lack of land ownership can undermine long-term capital growth.
LOCATION AND LIFESTYLE DRIVE DEMAND
Company RE chief executive Marcus Buskey says thoughtfully designed high-rise developments in lifestyle precincts can deliver strong returns, particularly in premium coastal markets.
Demand remains robust across the Gold Coast and inner-city Brisbane, driven by downsizers, professionals and interstate buyers seeking convenience and lifestyle.
“Apartments in premium Gold Coast areas like Mermaid Beach, Broadbeach and Burleigh Heads have consistently demonstrated capital growth, driven by limited availability, desirability of location and ongoing demand from lifestyle-focused buyers,” Buskey says.
He adds that quality, exclusivity, views and proximity to amenities remain critical factors influencing performance.
MELBOURNE MARKET SHOWS MIXED SIGNALS
Melbourne project marketing specialist Jon Ellis, founder of The Move, says apartments continue to dominate transactions, accounting for 360 of his last 400 sales.
However, he warns not all developments perform equally.
“Some lower-grade apartments in Melbourne may never go back up to the sales price they were achieving a few years ago,” Ellis says.
He notes that construction costs have risen sharply, making it harder to deliver strong investment yields. Yet demand remains strong for well-executed developments.
“Investors purchasing an apartment for $600,000 need to get about $600 a week in rent. If you can get that right and prove it, demand for apartments certainly outstrips residential houses.”
THE LAND FACTOR REMAINS CRITICAL
Like all investment opportunities, others favour a freestanding home over a high-rise apartment.
“In my opinion, the only people who make money from high-rise apartments are the developers who build and sell them,” buyers’ agent Gianni Musumeci says.
For this reason, the Sydneysider steers investors away from high-rise apartments. “While they may appear to be an appealing investment on the surface with attractive guarantees, modern designs and convenient locations at somewhat lower entry points, high-rise apartments are, in my view, rarely a good investment,” Musumeci, of Leverage Property Advisers, says.
“This is especially the case when compared to standard residential homes in suburban markets, primarily due to the overwhelmingly high supply of apartments, the high level of cash flow expenses, the number of defects commonly found in high-rise buildings and the cost to remediate them, as well as the lack of land ownership, which is the primary driver of capital growth.”
“Economics 101 tells us that capital growth is achieved when diminishing supply meets increasing demand. The issue with high-rise apartments is that they’re typically built in areas with overwhelming supply, and often, that supply exceeds demand,” he says.
“These developments are usually located around major transport hubs, and as a result, if you’re looking to buy in one of these areas, you’re competing with dozens or even hundreds of similar listings.”
“Apartments are far easier to mass produce because the only restriction is how high you can build. You can’t expect strong growth in a market that’s saturated. In contrast, standalone residential homes are limited by land availability,” Musumeci says.
WEALTH CREATOR FAVOURS FREEHOLD PROPERTY
Entrepreneur and investor Scott O’Neill, who has amassed a combined net worth of $252 million with his wife Mina, says his personal experience has reinforced the benefits of freehold ownership.
He owned a high-rise apartment early in his investing journey but sold it after two years.
“The yields can vary significantly, ranging from four to seven per cent, but that’s before accounting for sinking funds and strata fees. Your net returns often drop to between one and two per cent,” O’Neill says.
He says oversupply and rising strata costs can further weaken performance.
“Most long-term property owners end up selling high-rise apartments in favour of freehold properties.”
INVESTMENT DECISION DEPENDS ON STRATEGY
Despite the risks, apartments can still deliver strong results when chosen carefully.
Experts agree that location, developer quality, supply levels and long-term demand are critical factors.
While houses continue to offer superior land value and long-term growth potential, apartments can provide attractive yields and accessibility for investors seeking exposure to high-demand urban markets.
Ultimately, the right investment depends on an investor’s strategy, time horizon and appetite for risk.
Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.
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Office rents in Sydney, Melbourne and Brisbane are climbing at their fastest pace since the pandemic as tenants compete for premium CBD space amid tightening supply.
2 min
Australia’s major CBD office markets are recording some of their strongest rental growth since the pandemic, with businesses increasingly prioritising premium office space despite elevated geopolitical and economic uncertainty.
Knight Frank’s Australian Office Indicators Q1 2026 report found net effective rents in Sydney and Melbourne CBDs rose at their fastest annual pace since COVID-19, increasing 10.2 per cent and 6.8 per cent respectively over the 12 months to March.
Brisbane posted the strongest growth nationally, with net effective rents climbing 11.7 per cent over the same period.
The report points to a widening divide between prime CBD office towers and secondary office stock, as occupiers increasingly focus on quality, location and workplace amenity when making leasing decisions.
Knight Frank Senior Economist, Research & Consulting Alistair Read said demand remained heavily concentrated in premium assets within core CBD precincts, helping drive stronger rental growth in top-tier buildings.
“Occupier demand continues to be heavily concentrated in the most desirable CBD precincts and the highest-quality buildings, accelerating a sharp divergence between core and non-core markets,” Mr Read said.
According to the report, Sydney’s Core precinct and Melbourne’s Eastern Core significantly outperformed broader CBD markets over the past year.
“In Sydney’s Core precinct and Melbourne’s Eastern Core, net effective rents surged 14.3% and 16.1% over the past year, significantly outperforming the rest-of-CBD precincts,” Mr Read said.
The rental gap between prime and non-prime office locations has also continued to widen sharply.
“As a result, core CBD rents are now 54% higher than non-core locations in Sydney and 93% higher in Melbourne, highlighting the growing premium placed on amenity, accessibility and workplace quality,” he said.
Knight Frank said the strong rental growth across the major CBDs was being underpinned by a limited supply pipeline, with few new office developments expected to be delivered in the near term.
Mr Read said subdued construction activity was likely to support ongoing rental growth and tighter vacancy rates over the medium term, particularly for premium office towers.
“The combination of sustained demand and declining levels of new development will aid ongoing prime rental growth and lower vacancy rates over the medium term, particularly for best-in-class assets,” he said.
The report noted that current economic conditions were making new office developments increasingly difficult to justify financially.
“Economic rents remain well above expected market rents, making the construction of new office towers largely unviable, and concentrating tenant demand into existing buildings,” Mr Read said.
While suburban office markets generally remained subdued compared with CBDs, Melbourne’s Southbank precinct was identified as a relative outperformer, recording annual net effective rental growth of 2.7 per cent.
The report comes as broader Asia-Pacific office markets continue to stabilise following several years of disruption linked to hybrid work trends, inflation and rising interest rates.
Knight Frank’s separate Asia-Pacific Q1 2026 Office Highlights report found Sydney and Brisbane were among the strongest-performing office rental markets in the region, behind only Bengaluru and Tokyo for annual prime net face rental growth.
The Asia-Pacific report also found 18 of the 24 cities monitored across the region recorded stable or increasing rents in the first quarter of 2026, even as geopolitical uncertainty intensified following escalating conflict in the Middle East.
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