How would you define a townhouse? The townhouse is like a house in that the owner owns both the structure and the land on which it sits, but it is not free-standing - limited to the front and backyards and connected in a row and are usually two or three stories tall.
These often include a split second floor, where the upstairs owners have an area at the back of the building, and the downstairs owner’ has an area at the front. It may look like a very tall terrace development, but there are subtle differences. The bulk of townhouses are designed so that each owner has direct access to their property without disturbing or bumping with the other owner.
Townhouses in Australia are very sophisticated in design these days; certainly popular in several states in Australia, especially the suburbs due to the vast plot of land. Most developers often acquire an older house that sits on a bigger plot then subdivides into a few smaller blocks for such development, which retains their townhouse value in Australia.
In countries like the United States and Europe, a townhouse often refers to semi-detached or detached houses based on the wider property development. Owning a townhouse in London is likely one of the ultrarich elite who collects Lamborghinis for fun. However, townhouses are not in demand in other countries and certainly not in Australia.
The investors need to understand certain key differences between townhouses and single-family, standalone houses. In other words, people looking to purchase a rental property often view townhouses as a good starting point.
Let’s go into depth about why buying townhouses and factors to consider coming to such investment and who will look into the townhouse development?
Based on the latest research, many people who buy townhouses are either first home-buyers/young professionals, downsizers/retirees, property investors, or young families who may not afford a detached house in their desired area do not want to live in an apartment.
The question is, where is all this demand coming from?
In fact, townhouses have been around for a long time, especially with the new generation, location and trend, the demand tends to pick up more recently - the reasons such as;
- Easier access to Employment hubs with public transport and infrastructure
- Ability to get into better school catchments at a lower entry price
- Easy access to lifestyle and entertainment precincts
- Low maintenance living
- Reduced travel time due to traffic
The townhouse is often designed with 3 bedroom, 2 bathroom, 1 car and are very suited to many small families, and it is often likeable by retirees. Therefore, 4 or 5 bedroom house will surely be too big for their needs. You can clearly find this demographic already exists in most of the blue chips suburbs.
Their solution for them tends to downsize their home since they have lived their life for 20-30 years in this surrounding suburbs, or even for that matter, stay close to family and friends. In fact, this is the most common reason happening to most older people, not in Australia but every country! For them to adapt to the new surrounding suburb is definitely a challenging task.
Nevertheless, such supplies are usually limited as land is sacred in prime suburbs. Due to certain demographics or government authorities planning, some suburbs are not suited for apartments development, so a townhouse is definitely the best choice especially for locals.
Furthermore, no house and land packages development are available in the mature or prime suburbs in the market as the competition with locals demand is usually rather high. Seeing that foreigners can’t buy a secondary property, the developer does not need to target foreigners - as the local demands are just as good. Such development is often sold pretty fast with limited units, and there are not often cheap.
But if you compared it to established homes, it would be definitely more affordable - unlike those massive apartment blocks that were 100 to 300 units.
If you’re thinking about buying a townhouse near a major capital city, the budget will largely depend on which capital city you’re buying in. If the median house price in blue-chip suburbs is from AUD 2 million to AUD 3 million around Australia, you can get into a townhouse for around half of that cost, while you can still enjoy the benefits of living in a premium suburb.
For example, townhouses by distance 10km out from Perth, the price ranging will be around the high AUD 500k mark and upwards, while the closer to the city you go, the more expensive.
And in Melbourne, things are a lot direr with townhouses 20km out priced at AUD 750k or above; see the difference?
You may look into a few factors when it comes to buying townhouses, i.e. the demand and supply of the suburbs, the location and its accessibility, design of the house, ideally 2 bathrooms.
However, it’s important to keep in mind that if you buy a townhouse, the payment is easier than house and land, but the stamp duty is based on the contract price. Also, you’re part of a strata scheme that will incur its own costs, such as a Body Corporate fee. There are fees to be paid for the upkeep and maintenance of the property's public access roads and communal areas. But because of barely any amenities provided, the Body Corporate fees are very minimum, much cheaper than apartments.
If you can’t decide between an apartment or a house, a townhouse has a bit of both worlds. Townhouses usually offer space and privacy, with outdoor space and room for the family to move, garage/car park at your doorstep. As mentioned before, the number of stories of townhouse development is generally low density. Unlike most apartments, townhouses don’t have common spaces like shared hallways, an elevator or a lobby, so you get way more privacy—almost the same amount of privacy as a house –such as minus the shared walls. The end townhouses that only share one common wall are usually more popular among buyers when the time comes to sell.
To some peoples townhouses, all tend to look the same in the facade. The interior doesn’t differ much from every other townhouse in the development, so if you want to renovate, you’ll need to seek body corporate's approval first, particularly if the renovations are major. In most cases, you cannot change the facades except for internal renovation. Hence it’s not as flexible as house and land packages.
Generally, houses tend to generate better long-term capital growth, while apartments generate better rental returns. However, much of this is dependent on the state of the property market and the economy. The resale value for a townhouse will obviously depend on the location, nearby amenities, the demand for rental accommodation in the area, the area demographic, and the development itself, I meant by those boutique townhouses. Boutique townhouse developments usually have fewer townhouses, like around 8-10 units only, and are unique in the designs. To me, the best of two worlds; the privacy of the landed property and the facilities of an apartment complex.
Most of the time, agents encountered many investors, often giving the impression that they would like to invest except that they are still searching for the one; the question lies on when is the searching comes to an end?
And you might already lose the great deals of the promotion or incentives offered to you at that moment. Anyway, when you’re considering purchasing a property as an investment, rental income and capital growth are the two key things to keep top of mind. Therefore, before buying a property like a townhouse, you need to understand if townhouse-living will fit you and your lifestyle!
Stay tuned for more articles regarding Australia's current real estate.
This article was written by Angela Chen.