Spring 2026 is shaping up as a season of trade-offs. Listings are lifting across Geelong, the Bellarine and Melbourne, values have been drifting lower for five straight months, and borrowing power is tighter than it was a year ago thanks to APRA’s 6x debt-to-income cap. Put those together and one question is coming up in almost every conversation we have with buyers: should we compromise on the house, or buy a better unit or townhouse in a better location?
It’s not a question with one right answer, but it is a question with much better data than most buyers realise, and some real lending traps on the unit side that rarely get talked about. Here’s what the 2026 numbers actually say, how banks assess units and townhouses differently from houses, and how to think the decision through whether you’re buying in Armstrong Creek, Newtown, Torquay or metropolitan Melbourne.
The national downturn we covered in our Melbourne market guide is not hitting all property types equally. Cotality’s Home Value Index for August 2026 recorded a fifth consecutive monthly fall nationally (around 0.9% for the month and roughly 3.6% below the March 2026 peak), but underneath that headline, houses fell about 1.1% in August while units fell only about 0.5%. Over the three months to August the gap was similar: house values down around 3.3%, units down around 2.2%.
Stretch the window to a full year and the pattern is even clearer in the two biggest cities. In the 12 months to the end of August 2026, Sydney house values fell around 5.5% while units fell around 2.3%; in Melbourne, houses fell around 5.7% against roughly 2.5% for units. Units have not been immune from the downturn. They’re simply falling at less than half the pace of houses in the markets Victorian buyers care about most. Rental yields tell a similar story: Cotality’s end-of-August figures put gross yields for capital city units at around 4.6% against roughly 3.5% for houses, with Melbourne units higher again at about 5.1%.
The fall in Melbourne house values versus unit values over the 12 months to 31 August 2026, based on Cotality data. Units have been falling at less than half the pace of houses through this downturn. Figures are updated monthly and vary by suburb. Confirm the current numbers with your broker before making decisions.
For most of the past decade, houses pulled further and further ahead of units on price. That gap appears to have peaked this autumn: across the combined capital cities, the house premium over units reached roughly 53.5% in late May 2026 and had compressed to about 50.2% by the end of August as houses fell faster. In dollar terms, reported Cotality medians at the end of August put Melbourne houses around $920,000 against units around $629,000, a gap of nearly $300,000, or roughly 46%.
Two honest readings of that data exist, and a good broker will give you both. The optimistic reading for unit buyers: the premium is still near historic highs, units look comparatively cheap, they’re proving more resilient in the downturn, and demand is being pushed their way by affordability pressure and tighter lending caps. The cautious reading: houses hold more land, land has historically driven long-term capital growth, and a narrowing gap partly reflects houses falling, not units booming. Neither reading is a prediction, and past performance never guarantees what happens next. What the data does tell you is that the relative price of a unit versus a house is more attractive right now than it has been for years, and in Geelong and regional Victoria, where medians sit well below Melbourne’s, the same dynamic plays out at friendlier price points again.
| Factor | Unit / apartment / townhouse | House |
|---|---|---|
| Entry price | Substantially lower: Melbourne’s reported median unit price was around $629,000 at end-August 2026 vs about $920,000 for houses | Higher entry price; bigger deposit, more stamp duty, larger loan |
| 2026 value performance | Falling more slowly: Melbourne units down ~2.5% over the year to August (Cotality) | Falling faster: Melbourne houses down ~5.7% over the same period |
| Rental yield | Higher: capital city units around 4.6% gross; Melbourne units around 5.1% | Lower: capital city houses around 3.5% gross |
| Ongoing costs | Owners corporation fees, plus the risk of special levies for major works | No body corporate (usually), but you carry all maintenance and insurance yourself |
| Lending treatment | Extra scrutiny possible: small floor areas, high-density buildings and off-the-plan valuations can limit lender choice or LVR | Generally the widest lender appetite, subject to location and property condition |
| Long-term growth driver | Scarcity and location quality matter most; boutique blocks and townhouses with land content tend to behave more like houses | Land content, historically the stronger long-term capital growth driver |
Here’s the part of the unit-versus-house decision that rarely makes it into market commentary: the two are not assessed identically when you apply for a loan. Four differences matter most. First, size: many lenders apply stricter rules to very small apartments (commonly those under roughly 40 to 50 square metres of living area), which can mean a lower maximum loan-to-value ratio, a larger required deposit, or a shorter list of lenders willing to consider the property at all. Policies differ significantly between lenders, which is exactly where a broker earns their keep.
Second, density: some lenders manage their exposure to particular buildings and high-density postcodes, so a unit in a large tower can face more conservative treatment than a villa unit in a block of four in Belmont. Third, valuations: off-the-plan purchases are valued at settlement, not at contract, and in a softening market that valuation can come in below the contract price, a risk we unpack in our buying off the plan guide, and one reason Victoria’s off-the-plan stamp duty concession should never be the sole reason to sign a contract. Fourth, servicing: owners corporation fees are counted as an ongoing expense in your loan assessment, so a unit with high strata costs reduces your borrowing power compared with the same-priced house.
On the flip side, the lower purchase price of a unit works powerfully in your favour under 2026’s tighter lending settings. With most new lending now capped at six times gross household income, many buyers simply cannot borrow enough for the house they wanted a few years ago, but a well-chosen townhouse keeps the loan comfortably inside the cap, with buffer to spare. And for first home buyers, unit and townhouse price points are often what bring the 5% deposit scheme and Help to Buy into play in suburbs that would otherwise be out of reach.
Picture a couple renting in Geelong West: a nurse and an electrician with a solid deposit saved. Their original plan was a four-bedroom house in Armstrong Creek, but under the 6x debt-to-income cap the numbers are tight: the loan they’d need sits right at their ceiling, with nothing left for a buffer. Their broker models a second scenario: a modern three-bedroom townhouse in Newtown, roughly $180,000 cheaper, walkable to the river and their work. The smaller loan sits well inside the income cap, the deposit now clears a bigger share of the price, and the owners corporation fees (modest, in a boutique block of six with no lifts or pools) are factored into servicing from day one. They also ask their conveyancer to review the owners corporation certificate for special levies before going unconditional. Same budget, two very different risk profiles. The scenario is illustrative rather than a real client file, but it’s precisely the comparison we’re running for buyers every week this spring.
Buying into a unit means buying into a building, and the building’s finances become part of yours. Owners corporation fees vary enormously (a villa unit in a small Geelong block might cost a fraction of what a tower apartment with lifts, gyms and concierge services charges each quarter), and those fees flow straight through to both your household budget and your loan assessment. The bigger risk is the one-offs: special levies raised to fund major repairs, cladding rectification or defect works can run to tens of thousands of dollars per owner in badly affected buildings.
None of this makes units a bad buy. It makes due diligence non-negotiable. Before you go unconditional, have your conveyancer obtain and review the owners corporation certificate and records: the balance of the maintenance fund, any planned or proposed special levies, the insurance status of the building, and any history of defect disputes. For townhouses, check whether the owners corporation is active or largely dormant: many smaller Victorian developments only share insurance and driveway costs. Boutique blocks, villa units and townhouses with real land content are popular with Geelong and Bellarine buyers for exactly this reason: they capture the unit price advantage while keeping strata complexity, and strata risk, low.
Get pre-approved for both scenarios before you fall in love with either. Because owners corporation fees, property type and price all feed into your borrowing power, the unit budget and the house budget are two different numbers, and knowing both changes how you search. A properly assessed pre-approval that anticipates the property type you’re bidding on also avoids nasty surprises at valuation, especially for smaller apartments and off-the-plan purchases where lender policies differ most.
If you’re buying a home to live in, start with the honest budget question. If a house you’d actually be happy in fits comfortably inside your borrowing power (with a buffer for rate movements and life), the land content argues for the house, particularly on a long timeframe. If the house only works by stretching to your ceiling, a quality townhouse or unit in a better location is very often the stronger financial position: smaller loan, bigger buffer, and in this market, a property type that has been holding its value better. Location quality and scarcity matter more than the unit-versus-house label. A townhouse in a tightly held pocket of Newtown or Ocean Grove is a very different asset from an identikit apartment in an oversupplied tower precinct.
If you’re buying as an investor, the yield gap deserves attention: capital city units grossing around 4.6% against houses at 3.5% changes the holding cost equation meaningfully while rates are elevated. Our guides to buying your first investment property and rentvesting walk through how to structure the decision. And whichever way you lean, remember that every figure in this article is a market-wide average from Cotality’s August 2026 reporting: individual suburbs, buildings and streets behave differently, and the numbers will have moved again by the time you’re bidding. Treat the data as direction, not gospel, and get your own numbers assessed properly before you commit.
They’re performing more resiliently right now: Cotality’s August 2026 data showed units falling at less than half the pace of houses nationally, with higher rental yields, and the house-to-unit price gap has narrowed from its late-May peak. But ‘better’ depends on your goals: houses hold the land that has historically driven long-term growth. Neither past performance nor current trends guarantee future results, so weigh the data against your budget, timeframe and plans, ideally with professional advice.
For most standard units and townhouses, no. The process is the same as for a house. Extra hurdles can apply to specific property types: very small apartments (commonly under roughly 40 to 50 square metres of living area), units in high-density buildings or postcodes where a lender manages its exposure, and off-the-plan purchases where the settlement valuation may differ from the contract price. Policies vary widely between lenders, so matching the property type to the right lender before you apply matters.
Yes. Owners corporation (body corporate) fees are treated as an ongoing expense when lenders assess your loan serviceability, so high strata fees reduce the maximum you can borrow compared with an equivalent house purchase. When comparing a unit and a house at similar prices, factor the fees into both your loan assessment and your real monthly budget, and check the owners corporation records for planned special levies before going unconditional.
There’s no universal answer, but units and townhouses often make government support easier to access: their lower price points are more likely to sit within first home buyer scheme property price caps, they need a smaller deposit, and the smaller loan sits more comfortably under APRA’s 6x debt-to-income cap. The trade-off is less land and possible strata costs. Many Geelong first home buyers land on townhouses or villa units as the middle ground. Get both scenarios assessed so you’re comparing real numbers, not guesses.
We’ll model both scenarios properly (borrowing power, lender policies for the exact property type, scheme eligibility and strata costs) in plain English. Local experts across Geelong, the Bellarine, the Surf Coast and Melbourne, serving clients Australia-wide. No obligation.
With years of experience in mortgage broking and finance, Melanie helps first home buyers, refinancers, investors and business owners across Geelong, the Bellarine, the Surf Coast, Melbourne and regional Victoria make their money work harder. Contact our team on 03 9020 2699.
