Houses vs Units: Which Will Make You a Millionaire?

Anyone with a fully paid house is already a millionaire in Melbourne

House versus Units in Melbourne

I arrived in Melbourne last Sunday and will be in Melbourne for around 10 days. I met my friend who shared with me that she was staying in a townhouse and she explained that a townhouse meant that the owner of a big piece of land decided to sub-divide the land and build units within the same land. Her home is one out of 16 other units within the same piece of huge land. In other words, this particular house on one piece of land was demolished and 16 units of townhouses are now on the same piece of land. Do read a brief explanation below:

“In the Melbourne market, a house is a stand-alone dwelling on its own title, where you own both the building and the land it sits on. A unit is a broader term for a property within a larger complex, such as an apartment, townhouse, or villa, where you own the individual dwelling and share ownership of common land and areas through a strata title..” Source: https://www.catebakos.com.au/sundayblog/houses-vs-units-townhouses-fit/

When they say property would make people become millionaires…

Did you know that if you are someone who owns a HOUSE in Melbourne today and that house has been fully paid, you could actually already become a millionaire. If you are someone who owns a unit (townhouse or an apartment and it’s fully paid, you are already half a millionaire today. If it’s not fully paid, then just need to continue paying for it until the loan ends and you will already become a millionaire or half a millionaire. Please take a look at the latest prices of house and units for Melbourne, Australia below to understand why I say so.

Just Melbourne mah, does not work for Kuala Lumpur…

Just need to always remember this fact. Melbourne is an advanced property market. Whatever happens there will happen in Malaysia in the near future too. When land becomes too expensive, people will build more units on the same piece of land so as to keep the prices affordable enough for everyone. In Kuala Lumpur, if one is thinking about buying a piece of land within minutes of walking from KLCC, it is impossible to use the same piece of land to build houses like double-story terrace.

If the developer is building landed properties, this is how it could look like.

Land Cost – RM50 million (Say, this is for 5 acres of land). Typical Gross Development Value (GDV) should be 10 times the land cost. So, the GDV which developer would be aiming for should be RM500 million. If they build 10 units on the land, each unit would have to cost RM50 million each. Maybe it could be a bungalow unit since 5 acres means 220,000 sq ft. Every unit occupying 22,000 sq ft means it is possible to build a super huge bungalow unit or 80 x 100 sq ft and still have lots of land space surrounding the bungalow.

Alternatively, build up to 500 units of high rise and now every unit can be priced at RM1 million per unit. With the piece of land, this 500-unit high-rise is likely to be a super huge unit. Maybe we say 2,000 sq ft. So, RM1 million could even be just RM500 per sq ft if not lower. The only issue is that many people may not want to buy this unit because it’s still very expensive.

How to make it even cheaper and more affordable

Or build 1,000 units of smaller sized units and now the price per unit can be RM500,000. Let’s say it’s just RM500 per sq ft. With the benefit of standing in front of the balcony and one could see KLCC or just go down to the ground floor and walk to KLCC in a few minutes… Total units will be easily sold within a short period time yeah. By the way, I do not think there’s such a piece of land where all the owners could walk to KLCC within minutes and everyone is able to view KLCC from their balcony.

Millionaires? Yes, when it’s fully paid and one sells the property in future

I think this is one of the easiest way; property investment. Owning one and waiting for the final result. This is very different from NOT owning one and just waiting for the best property to pop along. If we own one unit, we can slowly repay the mortgage every month. This is coupled with a super slow and small increase of maybe 3 percent per year on average for the next 30 years. By then, maybe the median house price is already hitting RM1 million and well, you have also become a millionaire too.

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