Property investors in Brisbane would do well to invest in townhouse real estate developments because it is a promising asset class that provides not only a stable investment but is also poised for significant growth in the years to come.
Let’s take a look at why townhouse investment is such a good idea.
Rise in Housing Demand
Australia is currently facing an urban housing affordability crisis. While the country’s urban populations continue to grow, there are simply not enough medium-density housing options to go around. As a result, housing in urban areas is becoming extremely expensive, driving demand for more affordable housing options.
“To bring Australia out of the housing crisis, we need to drastically increase the supply of housing,” Master Builders Australia CEO Denita Wawn said recently.
Many Australians, especially younger families and young professionals who have not accumulated enough wealth to buy large homes, are looking for more affordable homes that are more spacious than an apartment but require less maintenance than a traditional detached house.
As such, townhouses are an attractive option, particularly appealing to first-time buyers, downsizers and middle-income families. The high demand for such housing ensures that the market remains relatively stable, with a steady pool of buyers or renters for many years to come.
The Australian Bureau of Statistics has reported huge rental price increases of late, rising 7.3% from 2023 to 2024, and noting that this rental price growth is indicative of low vacancy rates amid high demand.
Ongoing urbanisation further supports this demand, as more people continue to move towards urban centres to be close to work opportunities.
Townhouses are therefore a wonderful option for addressing the housing availability and affordability crisis in high-demand urban areas, offering an efficient use of limited land space and an attractive compromise between high-density apartments and low-density detached homes.
Lower Construction and Maintenance Costs
For developers, one of the most attractive aspects of building townhouses is their low construction and maintenance costs compared to building detached houses. This results in a better margin of return for developers and investors alike.
One of the reasons that townhouses are more cost-effective to build is that they typically share walls with neighbouring units, which reduces material and construction costs. They also occupy a smaller land footprint compared to standalone homes, further reducing the amount of money needed to invest in property while still offering land ownership, a key factor in real estate value creation.
Townhouses also offer developers the capability to build multiple units using one contractor and bulk shared materials. Since all units in a development are more or less uniform, the same bricks, paint and roofing materials, for example, can be used throughout.
The ability for developers to build multiple homes at once reduces the cost of the overall project without compromising on the potential value that each home can attract.
Townhouses are also easier to maintain because they are under a strata title, which means a body corporate is responsible for maintenance. This lowers the ongoing maintenance burden for owners, making them more attractive to those who wish to buy townhouse units.
Higher Rental Yields
Townhouses often offer higher rental yields compared to apartments and standalone houses, making them an attractive investment option for developers. This is because they balance affordability and livability so well, making them appealing to both homeowners and investors looking to secure a stable income stream.
The current state of high demand for such developments further adds to their appeal. Tenants who want to find a middle ground between the cost of renting detached homes and small apartments often find townhouses to be the best option.
Townhouses offer more space than apartments, perhaps even with a small garden, but without the high cost of a standalone home.
This middle-ground compromise leads to higher occupancy rates among townhouses, securing stable rental demand, which ultimately attracts investors who are looking to draw long-term tenants. For developers, this creates an attractive prospect, as they can be confident that townhouse units will sell quickly and will seldom be left vacant.
Possibility for Desirable Locations
It’s often possible to secure prime property for townhouse developments in well-established or growing suburban areas with proximity to essential amenities such as schools, transport, shopping centres and healthcare facilities.
Developing townhouses in these areas provides tenants and investors with access to high-quality and in-demand land parcels at affordable prices. The affordability and simultaneous location convenience make townhouses highly desirable for buyers and renters alike, especially when situated in suburbs where detached homes are prohibitively expensive.
The suburban appeal is also attractive, offering tenants and owners the opportunity to enjoy suburban lifestyles, such as gardens, parks, community facilities and a general sense of peace and quiet, without having to invest in an expensive standalone home.
Sustainability and Community
Across the market, there is a growing shift towards the prioritisation of sustainability, community living and convenience. Townhouses are well-positioned to meet this demand, as they align well with these trends.
By ensuring a townhouse development emphasises energy efficiency and eco-friendly designs, one can appeal to the growing environmentally conscious buyers. Also, the smaller land size and shared infrastructure help to reduce the overall environmental impact.
In addition to a lower carbon footprint, townhouse developments also offer a great sense of community due to their layout and shared spaces, such as shared play areas for kids or swimming pool areas, for example. This is a major selling point for families who want to feel as though they are living in a friendly neighbourhood.
Resilience to Market Fluctuations
Economic downturns can affect the property market, but townhouses tend to be more resilient compared to high-density apartments or large standalone homes.
This is because townhouses are positioned in the middle of the real estate market, where there is generally more consistent demand from renters and buyers. Even during economic slowdowns, townhouses are less vulnerable to market fluctuations due to their affordability and versatility, which ensures they continue to appreciate in value despite market movements.
In fact, townhouses might even see an increase in demand during an economic downturn as people search for more affordable housing options located closer to work and amenities to reduce commuting costs as well.
Are you a property investor looking for lucrative opportunities in Brisbane? Contact Groove Properties today!