How Changing Investor Behaviour Is Reshaping Property Types — And the Depreciation Opportunities Emerging With Them

Australia’s property investment landscape is undergoing one of its most significant shifts in decades. Tightening finance conditions, chronic rental shortages, and evolving housing preferences are pushing investors to rethink the types of assets they pursue. While traditional houses remain popular, investors are increasingly exploring units, micro apartments, build-to-rent, commercial to residential conversions, and secondary dwellings as they search for affordability, yield, and long term resilience. 

What many investors overlook, however, is that each of these emerging property types carries its own powerful depreciation profile — often stronger than traditional housing. As investor behaviour evolves, so too do the opportunities to maximise tax deductions and improve after tax returns. 

Below is a breakdown of the key shifts in investor behaviour and the depreciation advantages attached to each. 

🏙️ 1. The Rise of Units and Apartments: Affordability Meets Strong Depreciation 

With borrowing power reduced and house prices continuing to climb, many investors are turning to units and apartments as a more accessible entry point. But affordability isn’t the only drawcard — these properties often deliver exceptional depreciation outcomes. 

Why investors are shifting toward units 

• Lower purchase price compared to houses 

• Higher density living aligned with renter demand 

• Stronger yields in many metro markets 

• Lower maintenance and strata managed upkeep 

Depreciation advantage 

Units and apartments typically contain more plant and equipment assets than standalone houses — lifts, common areas, fire systems, gyms, pools, air conditioning, and more. These shared assets can significantly boost total deductions. 

Capital Claims’ analysis shows that units often generate higher first year and lifetime depreciation deductions than houses of similar age and value. 

Further reading: Why units and apartments generate great depreciation deductions for investor owners (Capital Claims) 

🏢 2. Micro Apartments: A Niche Asset With Outsized Depreciation Benefits 

Micro apartments — compact, cleverly designed dwellings — are gaining traction among investors seeking affordability and strong rental demand from students, singles, and young professionals. 

Why investors are considering micro apartments 

• Lower entry price 

• High demand in inner city and university precincts 

• Efficient layouts appealing to minimalist living 

• Attractive yields due to lower purchase cost 

Depreciation advantage 

Despite their size, micro apartments often pack in high value inclusions: integrated appliances, custom joinery, compact laundries, and premium finishes designed to maximise space. 

This concentration of modern fittings means micro apartments can deliver surprisingly high depreciation deductions relative to their size and cost. 

Further reading: Depreciation benefits for micro apartments (Capital Claims) 

🏘️ 3. Granny Flats and Secondary Dwellings: Dual Income Strategies with Strong Depreciation Upside 

As affordability pressures intensify, investors are increasingly adding granny flats or secondary dwellings to existing properties to boost rental income and improve cash flow. 

Why investors are building or buying granny flats 

• Dual income potential 

• Growing demand from downsizers, students, and multigenerational families 

• Lower construction cost compared to standalone dwellings 

• Ability to add value to existing land 

Depreciation advantage 

A newly built granny flat is considered a brand-new income producing asset, meaning investors can claim: 

• Full capital works deductions 

• Full plant and equipment deductions 

• High first year claims due to new construction 

This makes granny flats one of the most depreciation rich property types available to investors today. 

Further reading: Granny flat depreciation (Capital Claims) 

🏗️ 4. Build-to-Rent (BTR):
Institutional Grade Assets with Significant Depreciation Depth 

The build-to-rent sector is expanding rapidly as developers and investors respond to rental shortages and long-term housing demand. 

Why investors are shifting toward BTR 

• Stable, long term rental income 

• Professional management 

• Government incentives improving feasibility 

• Strong demand from renters seeking amenity rich living 

Depreciation advantage 

BTR developments are amenity heavy, often including: 

• Gyms 

• Coworking spaces 

• Rooftop terraces 

• High end communal facilities 

These inclusions create large pools of depreciable assets, delivering substantial deductions for owners or investment groups. 

🏚️➡️🏠 5. Commercial to Residential Conversions:
Adaptive Reuse With Fresh Depreciation Potential 

With office vacancies rising and housing shortages intensifying, investors are increasingly exploring commercial to residential conversions. 

Why investors are considering conversions 

• Lower acquisition cost for underutilised commercial stock 

• Ability to create high demand residential product 

• Opportunity to add value through redevelopment 

• Alignment with sustainability and urban renewal trends 

Depreciation advantage 

Conversions often involve: 

• New fit outs 

• New services (plumbing, electrical, HVAC) 

• New internal layouts 

• New fixtures and finishes 

• Scrapping of qualifying assets removed during the process 

Because so much of the building is new or substantially improved, depreciation deductions can be very high, especially in the early years. 

🏡 6. Traditional Houses: Still Popular, But Depreciation Varies 

While many investors are diversifying, houses remain a staple — particularly in growth corridors and regional markets. 

Why investors still choose houses 

• Land value appreciation 

• Family oriented rental demand 

• Flexibility for renovations or extensions 

Depreciation advantage 

Houses generally have fewer depreciable assets than units or BTR, but: 

• New builds still offer strong capital works deductions 

• Renovations can unlock new depreciation claims 

• Secondary dwellings can dramatically increase total deductions 

The Bottom Line: Changing Property Types Mean Changing Depreciation Profiles 

As investor behaviour shifts, depreciation opportunities shift with it. The move toward units, micro apartments, granny flats, BTR, and conversions is not just a response to market pressures — it’s also a pathway to stronger after tax returns. 

For investors navigating a complex market, understanding the depreciation profile of each property type can be the difference between a good investment and a great one. 

Don’t miss out on depreciation opportunities, get your free quote or call 1300 922 220 today.