Townhouses – the best of both worlds?

When it comes to property in Australia, townhouses have historically been a bit of a wallflower. They’ve tended to be largely ignored in the property media, possibly because mainstream statistics only talk about detached houses and units, and a townhouse is neither. For some buyers, townhouses have simply not been a consideration. But this is changing.

Why are townhouses coming into favour?

The Sydney property squeeze – that is, an increasing population combined with a dominant property model of sprawling suburbs with low-rise houses – is problematic and demands a rethink of housing.  Melbourne is experiencing similar issues, with other capital cities set to feel the pinch as their populations grow.

NSW Planning Minister, Rob Stokes, believes more terrace-style housing could be the solution. He has called townhouses the “missing middle”.¹

A number of property analysts are enthusiastic about townhouses too, not just as a viable solution to the demands of the growing population in our two biggest cities, but also as a type of property that is growing in popularity and is therefore potentially a good investment.

Property investment advisor Michael Yardney says townhouses could make a good investment because they tend to be in the inner city ring, where land is at a premium and supply – while on the increase – is still relatively limited. This is in stark contrast to apartment blocks, where hundreds of units may be constructed at the same location, lowering their investment potential. Importantly, too, demand for townhouses is rising.²

Who is turning towards townhouses?

Townhouses offer value for money, convenient location and low-maintenance living. Yardney says demand is increasing, particularly among young families and downsizers who can’t always get what they want from a house or unit.

“Many young families [want to be in] quality, blue-chip suburbs, where the median house price may be above their affordability and comfort level,” he says.² Townhouses are not only more affordable but offer many benefits for this demographic. They are often built where there is good access to public transport and employment hubs, sought-after school catchment areas and easy access to lifestyle and entertainment precincts.

Retirees wanting to downgrade from their large family home are also finding townhouses to be a good option, Yardney says. Many retirees want to stay in the same area, where they have family and other social connections, as well as familiarity in terms of services and facilities. Units aren’t always available in the same area and even if they are, unit living is a big change and often doesn’t provide the particular features they want in a home such as storage, space, location and privacy.

It tends to suit this demographic to sell the family home, downgrade to a townhouse and pocket the funds, allowing them to continue living comfortably. A townhouse is typically big enough to still enable adult children or other relatives to stay overnight, and is much more low maintenance than a house while still offering the space and privacy they are used to.

Angie Zigomanis from BIS Oxford Economics says many Gen Yers (who are now approaching their mid- to late 30s), will have lived in a unit during their 20s, and would now like remain in these inner or middle suburbs as they start to have families of their own. But they also want enough space, both indoors and outdoors, to accommodate young children. If they can’t afford a free-standing house, Zigomanis says, a townhouse can be a great compromise.³

The graph below shows that the age brackets 35-49 and 65+ are going to grow over the next decade, which will fuel this demand.³

“Between [Gen Y and Baby Boomers, we will see] more demand in those inner and middle suburbs for that medium-density-type product over the next decade,” Zigomanis says.³

Key features of a townhouse⁴

1. Usually more affordable than a detached house so may allow you to buy in a more desirable location.
2. Usually more expensive than a unit.
3. Typically has less space than a house, particularly in the outdoor area, with a smaller land size.
4. Big enough for most household combinations – unlike units – offering up to four bedrooms and three levels.
5. Usually has a small private outdoor garden or courtyard, unlike many units.
6. Maintenance tends to be lower than for a house, particularly garden maintenance.
7. No shared areas mean it is more private than a unit.
8. May be on a strata scheme, which brings fees and bylaws, however, tends to be less expensive and less restrictive than for a unit.
9. Design may lack originality and look the same as your neighbour’s.
10. As in a unit, you will typically share walls with your neighbours.
11. What you lose in privacy, you can gain in the community if your neighbours are people you enjoy.
12. Resale growth is usually lower than for detached houses and often equivalent to that of a unit.
13. As townhouse developments are typically pre-planned by councils, the location often means you are close to lifestyle precincts, transport, amenities and facilities.

SOURCES: ¹https://www.abc.net.au/news/2019-06-24/sydney-housing-push-for-more-medium-density-property-development/11238970, ²https://propertyupdate.com.au/why-townhouses-are-the-investment-of-the-future-and-how-to-find-the-right-one/, ³https://www.abc.net.au/news/2018-08-02/shoe-box-apartments-wone28099t-meet-demand-for-family-friend/10061710,⁴https://www.realestate.com.au/advice/townhouse-vs-house-vs-apartment-which-is-a-better-investment/