Are townhouses the new house?

New figures have revealed the popularity of townhouses is soaring, with approvals for new townhouses at record levels in Australia’s biggest cities.

In the 12 months to December 2017, townhouse approvals had the strongest year on year growth at 21% in Victoria (VIC) and 28% in New South Wales (NSW).

Conversely, in the same period, the number of approvals for detached houses in NSW and VIC fell by 2% compared to the previous year – with more Australians shifting away from detached houses in favour of higher density living.

An analysis of ABS dwelling unit data over the last 5-7 years has shown an exponential increase in townhouse approvals as more developers seek to meet this growing demand.

In 2017, annual townhouse approvals rose by 124% in Victoria (VIC) and 128% New South Wales (NSW), compared to 2011 figures.

Housing approvals drop

While the rate of growth for townhouse approvals has remained robust and positive for the last 5 years, the rate of growth for traditional detached housing approvals has been declining over the same period, with weaker overall year on year growth.

Houses & Townhouses – rates of growth compared

Over the past 5 years, VIC townhouse approvals averaged an annual rate of growth of 14.4% and NSW townhouses averaged an annual rate of growth of 15.3%. Detached housing approvals increased at lower rates of 2.6% and 9.3% respectively.

Houses & Townhouses – 5 year rate of growth

Comparable backyard to a House & Land

Typically, townhouses provide a more affordable, family-friendly alternative to a detached house, with more indoor and outdoor space and privacy than an apartment, but without the cost and upkeep of a larger home on a big block.

What’s interesting to note, however, is that many new townhouses aren’t compromising so much in the way of backyard space anymore.

As the cost of land continues to rise across the nation, block sizes are continuing to decrease, ultimately resulting in smaller backyards. In some cases, these backyards are the same size or only slightly larger than the backyard you would find in a townhouse.

In the Sydney suburb of Schofields for example, townhouses can offer up to around 70% as much backyard space as a standalone house & land package – with a substantial price saving to boot.

Schofields: Townhouse / House & Land scenario

For the growing number of families wanting a backyard without compromising their ‘lock up and leave’ lifestyle, townhouses can offer the ideal solution.

Location, location

Not only are townhouses an affordable option compared to detached housing, they are also increasingly better positioned in new master-planned communities.

A growing trend we are now seeing is that councils and developers are positioning townhouses in prized locations, near parks or on the waterfront. They also tend to be in closer proximity to transport hubs, retail and other amenities compared with house & land.

Luxury and affordability

With rising land prices in Sydney and Melbourne, affordability has been a key driver for prioritising townhouses across urban planning measures. The NSW Department of Planning and Environment, for example, states that medium density housing provides an important alternative, offering more affordable housing choice in a market that has traditionally been a mix of fully detached housing and apartments.

However, townhouses do come in a variety of different sizes and price points and are not necessarily pitched exclusively at entry level buyers.

Domain Data Scientist, Dr Nicola Powell, points out that many developers are now including fittings and fixtures and architectural design standards more closely linked to the luxury end of the housing market. They are also better catering for families with younger children through the inclusion of common gardens or other leisure spaces.

The rise and rise of townhouse living

In the 2016 Census, the growing shift away from detached housing towards higher density living was revealed. Townhouses accounted for 12.7% of resident homes in Australia, up from 9.9% in 2011 – while detached houses, though still the majority, continued their longer-term declining trajectory from 75.6.7% to 72.9%.

“In the face of affordability constraints, changing lifestyle choices and an expanding population, we expect townhouse living is only going to increase in popularity,” said Ironfish Head of Property, William Mitchell.

“And as more new townhouses are built to meet this growing demand, it’s likely the next Census data set will show an even stronger uptake of townhouse living.”

Ironfish Property Investment

At Ironfish, we take the ‘portfolio approach’ which is designed to leverage the unique advantages of each residential property type: apartments, townhouses and detached houses.

To find out more about how the Portfolio Approach can help you invest, please book an appointment with one of our experienced Strategists in your local city or join our next property investment seminar – many of our events are free.

You can also access our recommended townhouses list via this link.