Why townhouses will be the way of the future

High property prices and increased cost of land have seen demand for new-build duplexes and townhouses explode in Sydney, according to recent Australian Bureau of Statistics (ABS) data.

Property prices have steadily increased over the past decade, before soaring during the past 2 years amid the pandemic lockdown.

As Australia’s population expands and our suburbs become more heavily populated, the amount of available land is falling meaning properties on larger plots come at a premium price.

But the mismatch between property prices, wages growth and cost of living means instead of paying the higher prices, many Australians are instead opting to buy or build houses on smaller blocks of land.

And this trend for building duplexes and townhouses to maximise living on smaller land parcels has certainly boomed over the past decade as buyers snap up large plots, demolish older houses and build 2 (or more) in their place.

It’s unsurprising then that approvals for semi-detached dwellings, which include duplexes, terraces, and townhouses, have increased by 24% in NSW in the year to April, according to the ABS.

That compares with a 5.4% increase in house approvals during the same time period.

The regions leading the way with duplex and townhouse build

The Outer South West region, which takes in Camden, Campbelltown, and Wollondilly councils, led the way with a 204.5% increase in semi-detached building approvals in the year to March, according to ABS data.

It was followed by Baulkham Hills and Hawkesbury (up 155.4%), Central Coast (up 86.5%), and North Sydney and Hornsby (up 57.9%).

There are only 2 areas where the number of semi-detached building approvals actually fell over the year to March: City and Inner South and the Northern Beaches.

Who is driving demand for townhouses and duplexes?

We know what is driving demand - high land prices, the rental crisis, and housing undersupply - but what about who is driving the demand?

Mainly just 2 demographics: young families and retirees.

Young families looking for large accommodation in a blue-chip suburb but at an affordable price are one major demographic driving demand.

These young families are happy to live in large accommodations, but on a compact block of land, while still enjoying the benefits of living in a premium suburb.

Quite often they will be buying a 3 bedroom, 2 bathroom, 1 car townhouse that will fulfil all their needs with a small family.

At the other end of the scale, we have retirees and baby boomers looking to downsize their big houses to a smaller property in the same suburb.

These people can often easily sell their existing 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.

A final word

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.

And for investors also looking to take advantage of this trend 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, or 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 Greg Hankinson Greg and his team have successfully built and renovated in excess of 500 homes throughout Melbourne and are showing no signs of slowing down anytime soon. Being a Gold member of the Housing Industry Association and National Kitchen and Bathrooms Association, Greg’s focus is on Continued Professional Development, not only for himself, but his team of industry experts.