Best Hot Water System for Small Homes and Units

Jun 5, 2026

Choosing the best hot water system for a small home, unit or townhouse depends on household size, available space, energy source, number of bathrooms, daily hot water demand and the system already installed. Smaller properties usually need less hot water than large family homes, but the right system is not always the smallest or cheapest unit.

At Hot Water Outlet, you can compare hot water systems online, including electric hot water systems, heat pump hot water systems, gas hot water systems, instant gas hot water systems, instant electric hot water systems and common valves, pipework and fittings.

Quick Answer: What Is the Best Hot Water System for a Small Home or Unit?

The best hot water system for a small home or unit is usually a compact electric storage system, a suitably sized heat pump, a lower-flow instant gas system where gas is available, or an instant electric unit for specific point-of-use applications.

As a general guide:

Choose an electric hot water system if the property already has electric storage and you want a straightforward tank-style replacement.
Choose a heat pump hot water system if you want an efficient electric storage option and have suitable outdoor space and airflow.
Choose a gas hot water system if the property already uses gas storage and a traditional gas tank replacement suits the setup.
Choose an instant gas hot water system if the property has natural gas or LPG and continuous flow hot water suits the household.
Choose an instant electric hot water system only for suitable compact point-of-use applications where the electrical requirements match the product.

For most small homes and units, the best starting point is to check the current system type, available space and daily hot water use before comparing replacement options.

Why Small Homes and Units Need the Right Hot Water System

Small homes, townhouses and units often have less space for a hot water system. They may also have fewer occupants, fewer bathrooms and lower daily hot water demand than larger family homes.

However, smaller property does not always mean very low hot water use. A small townhouse with two adults, a bath, regular laundry and back-to-back showers may need more hot water than a one-bedroom unit with one occupant.

The right system depends on:

Number of occupants
Number of bathrooms
Shower habits
Bath use
Kitchen hot water use
Laundry use
Available cupboard, wall or outdoor space
Existing system type
Electricity, natural gas or LPG availability
Body corporate or building restrictions where relevant
Access for delivery
Required valves and fittings

A compact system can be a good choice when correctly matched to the property. An undersized system can lead to poor hot water performance, while an oversized system may cost more than needed and take up valuable space.

Hot Water System Options for Small Homes and Units

System Type	Good For	Main Benefit	Main Thing to Check
Electric storage	Units and townhouses already using electric hot water	Familiar tank-style replacement	Tank size, dimensions and power requirements
Heat pump	Small homes with outdoor space	Efficient electric storage option	Airflow, noise rating, space and tank size
Gas storage	Properties already using gas storage	Traditional gas tank replacement	Natural gas or LPG, tank size and recovery
Instant gas	Homes with gas wanting continuous flow	Compact wall-mounted gas option	Flow rate in L/min and gas type
Instant electric	Specific point-of-use applications	Small local hot water where suitable	Electrical requirements and intended use

The best option depends on what the property can support, not just the size of the home.

What Size Hot Water System Does a Small Home Need?

The right size depends on the system type.

Storage hot water systems are measured by tank capacity in litres. This includes electric storage, gas storage and heat pump systems.

Instant gas systems are measured by flow rate in L/min. They do not store a large tank of hot water. They heat water as it passes through the unit.

Instant electric systems are usually selected by application, flow demand and electrical requirements.

When choosing a size for a small home or unit, consider:

Number of people living in the property
Number of bathrooms
Number of showers per day
Shower length
Bath use
Kitchen hot water use
Laundry hot water use
Whether hot water is used in more than one place at once
Existing tank size or flow rate
Whether the current system runs out
Available space
Energy source
Product dimensions

A one-person unit may suit a smaller hot water system than a two-bedroom townhouse with regular shower, laundry and kitchen use. Always size the system to real demand.

Best Electric Hot Water System for Small Homes and Units

An electric hot water system is often a practical choice for small homes and units, especially where the property already has an electric storage tank.

Electric storage may suit a small home or unit when:

The current system is electric
There is no natural gas or LPG
A compact storage tank is preferred
The current location works
A like-for-like replacement is wanted
The property has suitable electrical supply
The tank size suits daily demand

Electric storage systems are usually compared by tank capacity, recovery rate, dimensions, pressure rating and connection positions.

For small homes, the biggest risk is choosing a tank that is too small. A smaller tank may be cheaper and easier to fit, but it still needs to keep up with normal shower, kitchen and laundry use.

Electric Hot Water for Small Homes: What to Check

Before choosing electric storage, check:

Current tank capacity
Available space
Number of occupants
Number of bathrooms
Shower habits
Recovery rate
Power requirements
Dimensions
Connection positions
Indoor or outdoor suitability
Required valves and fittings

If the current electric tank has always supplied enough hot water, a similar size may be a practical starting point. If it often runs out, compare larger or better-suited options before ordering.

Best Heat Pump Hot Water System for Small Homes

A heat pump hot water system can suit some small homes, especially where the property has suitable outdoor space and airflow.

Heat pump hot water may suit a small home when:

The property currently uses electric storage
An efficient electric option is preferred
Outdoor space is available
Airflow is suitable
Noise can be managed
The tank size suits the household
The product dimensions fit the location

Heat pumps are not always the easiest option for units or tight townhouses. Space, airflow, access and noise rating need to be checked carefully.

For small homes with outdoor space, a heat pump may be worth comparing against standard electric storage. For compact units with limited external space, electric storage or another system type may be more practical.

Heat Pump Hot Water for Small Homes: What to Check

Before choosing a heat pump, check:

Outdoor location
Airflow
Noise rating
Unit dimensions
Tank capacity
Household demand
Electrical requirements
Delivery access
Connection positions
Warranty information
Required valves and fittings
Body corporate or property restrictions if relevant

A heat pump should not be chosen by energy efficiency alone. It must also suit the physical property.

Best Gas Hot Water System for Small Homes

A gas hot water system may suit a small home if the property already uses natural gas or LPG and has an existing gas storage setup.

Gas storage may suit a small home when:

The current system is gas storage
Natural gas or LPG is already available
A traditional tank-style replacement is preferred
The selected tank size suits demand
The existing location works
The correct gas type is chosen

Gas storage systems are compared by tank capacity, recovery rate, gas type, pressure rating, dimensions and connection positions.

For small homes, do not choose a gas system without confirming gas type. Natural gas and LPG models are not interchangeable.

Gas Hot Water for Small Homes: What to Check

Before choosing gas storage, check:

Natural gas or LPG
Current gas storage tank size
Household hot water demand
Recovery rate
Dimensions
Connection positions
Pressure rating
Indoor or outdoor suitability
Required valves and fittings

If the property already has gas storage and the current size works well, a similar replacement may be practical.

Best Instant Gas Hot Water System for Small Homes and Units

An instant gas hot water system can suit small homes and townhouses where natural gas or LPG is available and continuous flow hot water is preferred.

Instant gas may suit a small home when:

The property has natural gas or LPG
A compact wall-mounted system is preferred
There is limited space for a large storage tank
The household wants continuous flow hot water
The selected flow rate suits the number of bathrooms
The correct gas type is chosen
A suitable external location is available

Instant gas systems are usually compared by flow rate in L/min. A smaller home may not need the same flow rate as a large family home, but the selected system still needs to support actual usage.

Instant Gas Hot Water for Small Homes: What to Check

Before choosing instant gas, check:

Natural gas or LPG
Required flow rate in L/min
Number of bathrooms
Number of occupants
Shower demand
Whether outlets are used at the same time
Controller compatibility
Outdoor location
Dimensions
Connection positions
Gas supply suitability
Required valves and fittings

A lower-flow instant gas system may suit some smaller homes, but do not choose by price alone. The flow rate still needs to match demand.

Best Instant Electric Hot Water System for Units

An instant electric hot water system can be useful for specific compact point-of-use applications, but it is not automatically suitable for whole-home hot water.

Instant electric may suit:

Small local hot water needs
Compact point-of-use applications
Specific fixtures
Small spaces where storage is not suitable
Applications where electrical requirements can be met

Instant electric systems need careful product selection. Electrical requirements can vary significantly, and not every unit is designed to supply multiple outlets or whole-home demand.

Instant Electric Hot Water for Small Homes: What to Check

Before choosing instant electric, check:

Intended use
Flow demand
Electrical requirements
Product suitability
Number of fixtures
Connection requirements
Dimensions
Warranty information
Whether licensed electrical work is required

A compact instant electric system can be a good fit for the right application, but it should not be treated as a direct replacement for every storage tank.

Best Hot Water System for a One-Bedroom Unit

A one-bedroom unit may only need a compact hot water solution if daily demand is low. The best option depends on the current system and available space.

For a one-bedroom unit, compare:

Compact electric storage
Existing electric tank replacement options
Instant electric for suitable point-of-use applications
Instant gas where natural gas or LPG is already available
Heat pump only if outdoor space and airflow are suitable

The current system is usually the best starting point. If the existing unit has worked well, a similar system type and size may be practical. If it regularly runs out, compare a larger or better-suited option.

Best Hot Water System for a Two-Bedroom Unit

A two-bedroom unit may have higher demand than a one-bedroom unit, especially if two or more people live there.

For a two-bedroom unit, compare:

Small to medium electric storage systems
Compact gas storage where already installed
Instant gas where gas is available
Heat pump options only if the property has suitable space and airflow
Required valves and fittings for replacement

A two-bedroom unit may need more hot water than expected if showers happen back-to-back or the laundry uses hot water regularly.

Best Hot Water System for a Townhouse

Townhouses can vary widely. Some have compact internal hot water cupboards, while others have outdoor locations suitable for larger systems or heat pumps.

For townhouses, compare:

Current system type
Available outdoor space
Garage or cupboard space
Number of bathrooms
Number of occupants
Energy source
Body corporate requirements if relevant
Delivery access
Noise considerations
Required valves and fittings

Townhouses may suit electric storage, heat pump, gas storage or instant gas depending on the setup. The best option depends on the actual layout.

Best Hot Water System for a Granny Flat

A granny flat often has lower demand than a main family home, but it still needs a correctly sized hot water system.

For a granny flat, compare:

Number of occupants
Bathroom and kitchen use
Laundry use if included
Available energy source
Available space
Electric storage options
Instant gas where gas is available
Instant electric where suitable
Delivery access
Connection requirements

A compact electric storage system or suitable instant system may work for some granny flats, but the selected product must match the application.

Best Hot Water System for Small Homes With One Bathroom

A one-bathroom small home usually has lower peak demand than a two-bathroom home, but shower timing still matters.

For one-bathroom homes, compare:

Compact or medium electric storage
Heat pump if outdoor space is suitable
Gas storage if already installed
Instant gas if gas is available
Instant electric for suitable point-of-use use

If multiple people shower back-to-back, the system may need more capacity than expected.

Best Hot Water System for Small Homes With Two Bathrooms

A two-bathroom small home needs more careful sizing. Even if the property is compact, two bathrooms increase the chance of simultaneous hot water use.

For two-bathroom small homes, compare:

Medium electric storage
Heat pump with suitable tank capacity
Gas storage with suitable recovery
Instant gas with suitable flow rate
Current system performance
Peak use patterns

If both bathrooms may be used close together, do not choose a very small system just because the property is compact.

Best Hot Water System for Small Homes Replacing Electric Storage

If the property currently has electric storage, compare another electric hot water system first.

A like-for-like electric replacement may suit if:

The current tank size works well
The system location is suitable
The household demand has not changed
The property does not have gas
A simple replacement is preferred

A heat pump may be worth comparing if:

Outdoor space is available
Airflow is suitable
Noise can be managed
An efficient electric storage option is preferred
The property layout supports it

For many units, standard electric storage may be more practical than heat pump if outdoor space is limited.

Best Hot Water System for Small Homes Replacing Gas Storage

If the property currently has gas storage, compare gas hot water systems and instant gas hot water systems.

Gas storage may suit if:

A traditional tank replacement is preferred
The current setup works well
The existing gas type is confirmed
The selected tank size suits demand
Space is available for the tank

Instant gas may suit if:

Continuous flow hot water is preferred
A compact wall-mounted unit is desired
Natural gas or LPG is available
The selected flow rate suits the home
The location and gas supply are suitable

Changing from gas storage to instant gas should be assessed by licensed tradespeople.

Best Hot Water System for Small Homes Replacing Instant Gas

If the property already has instant gas, start by checking the current flow rate and gas type.

A similar instant gas replacement may suit if:

The old system kept up with demand
Household size has not changed
Bathroom count has not changed
Natural gas or LPG type is confirmed
Controller requirements are the same
The existing location still works

A different flow rate may be worth comparing if the old unit struggled or if household demand has changed.

Best Hot Water System for Small Homes During a Renovation

Renovations can change hot water demand, even in a small home or unit. A new bathroom, upgraded kitchen, larger bath or laundry change can affect system choice.

For small home renovations, consider:

Future number of bathrooms
Kitchen layout
Laundry use
Bath or shower changes
System location
Available space
Energy source
Tank size or flow rate
Required valves and fittings
Body corporate rules where relevant

Plan hot water around the finished property, not just the current system.

Space and Access Considerations for Units

Units and townhouses can have extra space and access constraints. Before ordering a hot water system, check the physical location carefully.

Important checks include:

Cupboard dimensions
Balcony or outdoor space
Garage space
Wall mounting options
Doorway access
Stair or lift access
Delivery access
Drainage
Ventilation or airflow
Noise restrictions
Body corporate rules
Existing pipework

A hot water system with the right capacity still needs to physically fit and be deliverable.

Body Corporate and Building Considerations

Some units, apartments and townhouses may have body corporate or building rules that affect hot water replacement.

Before ordering, check whether there are rules about:

Outdoor unit placement
Balcony equipment
Noise levels
Heat pump location
Gas appliances
External wall mounting
Drainage
Access
Appearance
Common property

Hot Water Outlet sells supply-only systems and accessories online. Any building approval, body corporate approval or installation assessment should be handled before purchasing where required.

Best Hot Water Brands for Small Homes and Units

Hot Water Outlet lists recognised brands across electric, gas, heat pump and instant gas categories.

Depending on the property and system type, you may want to compare:

Brand can help narrow the search, but the final decision should be based on system type, size, flow rate, energy source, dimensions, connection positions and property suitability.

Valves, Fittings and Accessories for Small Hot Water Systems

Small hot water systems may still need compatible valves, fittings or pipework. A compact unit does not mean the order is automatically simple.

Common items to check include:

Tempering valves
Pressure relief valves
Duo valves
Non-return valves
Isolation valves
Copper pipework
Fittings
Controller accessories
Thermostats
Elements
Connection parts

Hot Water Outlet has a dedicated range of valves, pipework and fittings to help customers compare common hot water accessories.

Always confirm compatibility before ordering.

Common Mistakes When Choosing Hot Water for Small Homes

Choosing the Smallest System Automatically

A small property does not always need the smallest hot water system. Usage matters more than floor size.

Choosing by Price Alone

A cheaper system may be too small, the wrong gas type, the wrong flow rate or unsuitable for the location.

Ignoring Dimensions

Compact spaces need careful measurement. Check height, width, depth and access before ordering.

Forgetting Body Corporate Rules

Units and townhouses may have rules about outdoor units, noise, balcony placement and appearance.

Choosing Heat Pump Without Checking Airflow

Heat pumps need suitable outdoor space and airflow. They may not suit every unit or compact townhouse.

Choosing Instant Gas Without Checking Gas Type

Natural gas and LPG systems are not interchangeable. Always confirm gas type before ordering.

Assuming Instant Electric Suits Whole-Home Use

Instant electric systems are usually application-specific. Check the intended use and electrical requirements carefully.

Forgetting Valves and Fittings

The main system may not be the full order. Valves, pipework and fittings may also be required.

Small Home Hot Water Buyer Checklist

Before ordering a hot water system for a small home, unit or townhouse, check:

Current hot water system type
Current brand and model
Current tank size or flow rate
Whether the current system runs out
Electricity, natural gas or LPG
Number of occupants
Number of bathrooms
Shower habits
Bath use
Kitchen hot water use
Laundry use
Available space
Cupboard, wall or outdoor dimensions
Delivery access
Body corporate requirements if relevant
Desired system type
Tank capacity if storage
Flow rate in L/min if instant gas
Electrical requirements if instant electric
Heat pump airflow if relevant
Heat pump noise rating if relevant
Gas type if choosing gas
Connection positions
Required valves and fittings
Warranty information
Product specifications

Compare Hot Water Systems for Small Homes and Units Online

Hot Water Outlet makes it easier to compare hot water systems for small homes, units and townhouses by type, brand, size, energy source and product specifications.

Start with:

FAQs About Hot Water Systems for Small Homes and Units

What is the best hot water system for a small home?

The best hot water system for a small home depends on the current setup, number of occupants, bathrooms, available space and energy source. Compact electric storage, suitable heat pump, gas storage, instant gas and instant electric options may all suit different properties.

What is the best hot water system for a unit?

For many units, the best option is often the system type already installed, provided it suits the household. Electric storage is common in many units, while instant gas or compact systems may suit some properties where the energy source and location are suitable.

What size hot water system does a small home need?

The right size depends on the number of people, bathrooms, shower habits, kitchen use and laundry use. Storage systems are measured in litres, while instant gas systems are measured by flow rate in L/min.

Is instant gas hot water good for small homes?

Instant gas can suit small homes where natural gas or LPG is available and the selected flow rate matches demand. It may be useful where a compact wall-mounted system is preferred.

Is electric hot water good for units?

Electric storage hot water can be practical for units, especially where an electric tank is already installed. The tank size, dimensions, power requirements and connection positions need to match the property.

Is a heat pump suitable for a unit?

A heat pump may suit some units or townhouses, but only where outdoor space, airflow, noise rating, access and building rules allow it. Heat pumps are not suitable for every compact property.

Is instant electric hot water good for small homes?

Instant electric hot water may suit specific point-of-use applications, but it is not automatically suitable for whole-home hot water. Check the product’s intended use and electrical requirements before ordering.

Should I replace my unit hot water system with the same size?

Replacing with the same size may work if the old system supplied enough hot water and household demand has not changed. If the current system runs out or does not suit the property anymore, compare other sizes or system types.

Do small hot water systems need valves and fittings?

Some small hot water replacements still require valves, pipework or fittings depending on the system type, pressure rating and connection layout. Browse valves, pipework and fittings and confirm compatibility before ordering.

Can I install a hot water system in a unit myself?

No. Hot water systems involve plumbing, gas and electrical work that should be completed by appropriately licensed tradespeople. Hot Water Outlet sells supply-only hot water systems and accessories online, and may help organise quotes from reputable installers where appropriate.

Find the Best Hot Water System for Your Small Home or Unit

The best hot water system for a small home, unit or townhouse is the one that suits the property’s space, energy source, household demand and replacement setup. Before ordering, compare tank capacity, flow rate, gas type, dimensions, connection positions, warranty information and required accessories.

Browse hot water systems online with Hot Water Outlet to compare electric, heat pump, gas, instant gas, instant electric and hot water accessories by brand, size and product specifications.

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