IP Myths: Unit CG vs House CG

That houses produce significantly better Cg than units seems to be one of those real estate truisms that gets constantly repeated. I'm no expert but it seems to me that it can't be logically true. If houses constantly significantly outperformed units in capital growth, over the time the price differential between the two would grow enormously.

For example, if you bought a 2-bedroom house that for $80,000 30 years ago that averaged 8% CG it would be worth around $800,000 today. Let's say you bought a 2 bed apartment in the same area for 50,000 at 5% CG, it's value today would be $216,000. Clearly this isn't the case in the real world.

Perhaps my maths is shaky, but logically if houses constantly outperform units the price differential between them will eventually become so great that it makes no sense to purchase a house (who'd spend 4 times more to buy a 2 bedroom house than flat of a comparable size) and so demand for houses would fall, leading to a price decrease.

Yes, I realise the house *might* be redeveloped into flats, but the houses of Sydney's inner west have yet to be razed to the ground.

The same logic seems to go for all those people who say studio's don't increase in value. Why then can't I buy a studio apartment in Potts Point for $50,000? (I lived in one in Elizabeth Bay in 2001 that was worth 180 grand and recently resold for 380 thousand.)

I'd be happy to be proved wrong. Any thoughts welcome.