Residential vs commercial property investment

Whether to invest in residential or commercial property depends on a range of factors, such as your goals, risk appetite and financial circumstances.

If you want to invest in property in Australia, you have two broad options – residential or commercial. It’s crucial to understand the key differences between investing in each so that you can make the best choice for your specific financial needs and goals.

Property types

This is the most obvious difference. Commercial properties are used for business purposes, either by business owners or their tenants. For example:

  • retail shops
  • office space
  • industrial facilities such as factories or warehouses.

Residential properties on the other hand are where people live, either as owner-occupiers or as tenants. For example:

  • individually owned, freestanding houses on blocks of land
  • townhouses
  • apartments
  • duplexes


Many people have an understanding of residential properties simply because we all live in one. Investing in residential property has long been viewed in Australia as a sound way to accumulate long-term wealth.

According to the latest figures:

  • 67% of Australians own or are buying their own home.
  • More than 2.2million Australians own one or more investment properties.

However, far fewer people have direct experience with owning or renting commercial properties. Investing in any type of property requires specific knowledge and research to ensure you make a sound investment. Let’s take a look at some of the differences between the two options.


Commercial property lease agreements tend to be more complex than residential agreements and they usually require a legal professional to tailor them to the specific characteristics of the commercial property, for example regulations on the types of businesses that can operate from a commercial property.

Residential lease agreements are generally standardised with some variations in each state, with common terms for both landlords and tenants.

Vacancy periods

In recent times, tenant vacancy periods on commercial properties have been longer than for residential properties, especially during the current housing crisis in Australia that has residential vacancy rates at record lows.

The sight of vacant commercial properties is not uncommon, with many businesses impacted or still in recovery post pandemic and while the economy features pressure on cost of living for consumers. Of course, this is all relative to industry.


Because the commercial property market is dependent on economic conditions, it can be a riskier investment than residential property. You need to generate higher commercial property returns to compensate for this higher risk.


As residential property is generally seen as a safer investment than commercial property, lenders will:

  • usually charge a lower interest rate.
  • be prepared to lend you more (usually up to 80% of the property’s value, meaning you only need a 20% deposit).

With commercial property finance, you will:

  • usually be charged a higher interest rate.
  • need to come up with at least a 30% deposit (and possibly more).

Capital growth

History shows that Australian property prices in good locations have a long-term growth trend for the past three decades. The capital growth of commercial properties on the other hand has tended to be more volatile over the same period in line with economic fluctuations.


Tax implications

There are different tax implications between investing in commercial and residential property. For example, you will usually be charged 10% GST (goods and services tax) on the selling price of a commercial property, but you won’t be charged GST on the sale of a residential property.  

Both residential and commercial properties are subject to Capital Gains Tax (CGT) if you make a profit on their sale, though a range of CGT discounts are available. You should seek professional advice on the potential tax implications of both types of investments based on your specific financial situation.

The bottom line

Whether investing in residential or commercial property is the better option for you depends on a range of factors such as your investment goals, risk appetite and financial circumstances. In recent times, residential property as an asset has proven to be successful for many Australians, supported by strong capital growth and high rental demand.

The information provided is general in nature and should not be taken as advice. It does not consider your personal circumstances, needs or objectives. We recommend seeing your accountant to determine the best strategy for you.  

How we can help

Our expert team at DPN can help you with all aspects of residential property finance, investment and ongoing management, including a range of multi-rental income options to supercharge your investment return.

Contact us today to find out more!

Related Articles


Subscribe to Parler

Educational articles on maximising returns
Detailed research pieces on high-growth regions
News on finance, lending and tax in Australia
Early access to webinars and exclusive events

Join our community

Each month you'll receive our newsletter with exclusive property research, investing tips & market alerts.


Thank you

You have now been successfully subscribed. We hope you enjoy all tips and resources from Parler.
Oops! Something went wrong while submitting the form.

Are you ready to live the life you want?