By Michael Yardney December 20, 2025

A A A

1 View comments

Why townhouses are the investment of the future and how to find the right one

Property Investment
Why townhouses are the investment of the future and how to find the right one

Key takeaways

Townhouses bridge the gap between houses and units.

They deliver the lifestyle, space, and functionality of a freestanding home, but at a lower price point.

This makes them attractive to buyers who want more than an apartment can offer but can’t stretch to a house in the same suburb.

With growing demand and constrained supply, well-selected townhouses in boutique complexes are primed to deliver strong capital growth and rental resilience.

Most investors chase houses for growth or units for affordability — but what if the real sweet spot lies in between? Townhouses are emerging as the quiet achievers of our property markets, delivering the space and lifestyle families crave, but at a price point and location that’s still within reach.

While the crowd is distracted by apartments and house-and-land packages, savvy investors are quietly positioning themselves for the townhouse revolution.”

In this article, I’ll explain why townhouses are set to outperform in the years ahead, who’s driving the demand, and the critical filters you must apply to separate the right opportunities from the wrong ones.

Get this right, and you’ll own an investment that’s scarce, desirable, and primed for long-term growth.

Why Demand for Townhouses Is Growing

Young families priced out of houses

Detached homes in inner and middle-ring suburbs are increasingly out of reach for first-home buyers and young families.

Townhouses provide the bedrooms and living space they need, often with outdoor courtyards, but at a fraction of the price of a freestanding house in the same location.

2. Downsizers trading space for lifestyle

Baby Boomers and empty nesters want to stay in familiar suburbs but don’t need or want the upkeep of a large house.

Townhouses give them low-maintenance living while keeping them close to family, friends, and amenities.

They can easily sell their home for a considerable amount and then downgrade into something like a townhouse with a great deal of change to spare that allows them to continue living comfortably.

3. Investors seeking rental resilience

Renters value townhouses for their space and practicality.

They attract longer tenancies and more stable rental returns compared to one-bedroom apartments.

Why Supply Is Constrained

Another reason I see a huge opportunity for this type of asset moving forward is that supply is fairly limited.

They are not like these massive apartment blocks, where 200 – 300 apartments can be constructed in the same location within a short time frame.

Generally speaking, in the inner cities they will only be built on land zoned for development of 3 or 4, in some cases slightly more and as we know, the land is already at a premium in these locations.

How to Find the Right Townhouse Investment

Not all townhouses are created equal. Here’s a practical filter system you can use:

The Macro Filters – Location first

Suburb selection: Look for inner- and middle-ring suburbs with strong employment hubs, lifestyle amenities, and good transport links.
Demographics: Target areas where demand from young families and downsizers is rising - in particular suburbs, there's a gentrifying and more affluent people moving in.
Scarcity: Avoid oversupplied locations (especially new outer-ring estates).

The Micro Filters – What makes a great townhouse

Layout: At least 3 bedrooms, ideally with the master downstairs.
Bathrooms: Minimum 2 bathrooms to meet family needs.
Outdoor space: Courtyards, balconies, or private gardens add livability.
Parking: A secure garage or off-street parking is essential.
X-factor: A design feature that makes the property stand out — for example, natural light, high ceilings, or architectural appeal.

In summary

Townhouses are positioned perfectly between houses and apartments, offering the space and lifestyle buyers want and the scarcity investors need.

Before you chase the next “hot suburb,” run your shortlist through these macro and micro filters.

If you get this one decision right, you’ll secure an asset that grows in value, attracts quality tenants, and stands the test of time.

Townhouses aren’t just the middle ground — they may well be the future of residential investment in Australia.

There will be an increased amount of demand moving forward for townhouses in well-located areas as younger families look to push into superior locations and existing homeowners downsize into low-maintenance living.

There are opportunities here for investors also to take advantage of this trend, in these locations, there are not enough of these types of properties being built so supply will remain tight.

It is firstly important to understand what is happening and then pinpoint the right location where these shifts are occurring.

You should be looking in areas where there is already a scarcity factor and look to buy in small, boutique complexes.

Start with key macro factors in each suburb such as job growth, public transport, and lifestyle factors, and then drill down into the macro factors.

Look for a point of difference, a large courtyard, and extra off-street parking, and ensure you find the correct layout.

By following these steps, you can start to take advantage of these shifts now and as they continue to develop into the future, it could pay off handsomely.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.