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4 reasons townhouses are gaining popularity

By Noemi Pamintuan-jara 20 November 2021 | 1 minute read

The booming Melbourne housing market is undergoing transformation – and it’s seeing more investors and owner-occupiers express interest in townhouses. But why?

4 reasons townhouses are gaining popularity

Demand for medium-density solutions, such as townhouses – which can also be known as “townhomes” – in greenfield estates is increasing as house and land prices in Melbourne’s growth corridors become increasingly out of reach for many first-time buyers due to housing affordability issues.

This is according to Real Property Management (RPM) Australia’s Greenfield Market Report for the third quarter of 2021, which also noted that almost all large-scale developments had completed townhouse projects.

RPM reported that demand is projected to continue to climb as buyers seek a more affordable home and the demand for stand-alone boutique townhouse estates grows.

Digging into results of the September quarter study, RPM gave detailed data on how townhouse buyers differ from house and land buyers in the metropolitan Melbourne and Geelong growth regions.

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The most noticeable difference in purchasers is age, where the typical purchaser of a townhouse is slightly younger than that of a traditional home.

Buyers of townhouses between the ages of 25 and 34 (36 per cent) are slightly fewer than buyers between the ages of 35 and 49 (40 per cent).

Whereas, in the case of home and land buyers, individuals aged 25 to 34 make up 34 per cent of buyers, compared to 48 per cent of those aged 35 to 49.

In terms of household size, single buyers account for a substantially higher share of townhouse buyers: those with children account for 32 per cent of townhouse buyers but only 16 per cent of house and land families, while those without children account for 17 per cent and 7 per cent, respectively.

The report also revealed that townhouse buyers typically have a lower household income due to fewer family members and smaller homes. 

When compared to townhouse buyers, who typically have a $99,091 median household income, a much higher proportion of house and land buyers ($118,125 median household income) are in the higher income categories.

What, then, is compelling young home buyers to purchase a townhouse?

Here are the key advantages of a townhouse over a house or an apartment that are contributing to the sector’s growing popularity identified by the RPM Greenfield Market Report:

1. Size

A townhouse is essentially a house with the footprint of a unit, utilising verticality to retain internal sizes comparable to ordinary residences while preserving outdoor space for courtyards. Townhouses typically provide the size and privacy of a home, as well as outdoor space and enough room for the family to walk around.

2. Affordability

Townhomes are more cost-effective than single-family houses, and with the median house price in Melbourne surpassing $1 million this year, affordability is a major selling point, especially for first-time buyers and downsizers.

For example, RPM’s research mentioned that townhouse sales are higher in Melbourne’s south-east growth corridor due to the relatively higher price for a house and land combo.

3. Investment

The RPM survey particularly looked at the ratio of owner-occupiers to investors, and the result is surprisingly consistent across product types, with investors accounting for little more than a third of townhome buyers and only slightly more than a third of home and land buyers.

This illustrates that townhouses are not only a cost-effective option for first-time buyers and singles but also a great investment for the astute small-scale investor, as they offer comparable weekly rental returns to detached homes.

Additionally, since townhomes come with land, they are a better long-term investment than detached dwellings for those new in property investment.

In particular, millennial-generation buyers who have no home ownership experience and no time for home upkeep may benefit the most from starting in a townhouse then upgrading to a detached house only after learning how to maintain a property.

4. Innovation

The layout of a traditional apartment has stayed pretty consistent over the years, whereas townhomes are intrinsically adaptable when it comes to design.

If a small gazebo, edible fruit garden, or a stone walkway is your thing, you have the option to go for these enhancements because you have more control over customisation. Technological and design innovations are all part of this design flexibility.

RPM acknowledged that developers are becoming more conscious of these property market preferences and are beginning to incorporate more distinctive products into their market offerings in Melbourne and the surrounding locations.

Townhomes are growing more appealing to buyers as longer-term work-from-home arrangements allow buyers to look further afield and not be tied to certain office locations.

As a result, RPM has projected both a high demand for townhouses and an increase in townhome supply over the next 12 months as developers continue to incorporate these products into their masterplans.

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4 reasons townhouses are gaining popularity
4 reasons townhouses are gaining popularity
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