Demand for medium-density solutions, such as townhouses – which may also be referred to as “townhouses” – in new areas is increasing as house and land prices in Melbourne’s growth corridors become increasingly expensive. increasingly out of reach for many first-time buyers due to housing affordability issues.
This is according to Real Property Management (RPM) Australia’s Greenfield Market Report for the third quarter of 2021, which also noted that almost all large-scale developments had completed townhouse projects.
RPM said demand is expected to continue to climb as buyers seek a more affordable home and demand for freestanding townhouses increases.
Digging into the September quarter survey results, RPM provided detailed data on the difference between townhouse buyers and home and land buyers in the Melbourne and Geelong metropolitan growth areas.
The most noticeable difference among buyers is age, where the typical townhouse buyer is slightly younger than that of a traditional house.
Townhouse buyers between 25 and 34 years old (36%) are slightly less numerous than buyers between 35 and 49 years old (40%).
While, in the case of home and land buyers, those aged 25-34 account for 34% of buyers, compared to 48% of those aged 35-49.
In terms of household size, single buyers represent a significantly higher share of townhouse buyers: those with children make up 32% of townhouse buyers. buyers but only 16% of families of houses and land, while those without children account for 17% and 7% respectively.
The report also revealed that the townhouse buyers generally have lower family incomes due to fewer family members and smaller homes.
Compared to the townhouse buyers, who typically have a median household income of $99,091, a much higher proportion of home and land buyers (median household income of $118,125) fall into the higher income categories.
So what drives young buyers to buy a townhouse?
Here are the main advantages of a townhouse over a house or an apartment that contribute to the growing popularity of the sector identified by the RPM Greenfield Market Report:
A townhouse is essentially a house with the footprint of a unit, using verticality to keep internal sizes comparable to ordinary residences while preserving outdoor space for courtyards. Townhouses typically offer the size and privacy of a home, along with outdoor space and enough room for the family to roam around.
Townhouses are more cost-effective than single-family homes, and with the median home price in Melbourne topping $1 million this year, affordability is a major selling point, especially for first-time buyers and downsizers.
For example, RPM’s research indicated that townhouse sales are higher in Melbourne’s Southeast Growth Corridor due to the relatively higher price of a house and land.
The RPM survey looked particularly at the homeowner-to-investor ratio, and the result is surprisingly consistent across product types, with investors accounting for just over a third of townhouse buyers and only slightly more a third of home and land buyers.
This shows that townhouses are not only a profitable option for first-time buyers and singles, but also an excellent investment for the shrewd small investor, as they offer weekly rental returns comparable to single-family homes.
Additionally, because townhouses come with land, they are a better long-term investment than single-family homes for new real estate investors.
In particular, millennial buyers with no home ownership experience and no time to deal with home maintenance may benefit most from starting out in a townhouse. then moving to a detached house only after learning how to maintain a property.
The layout of a traditional apartment has remained fairly consistent over the years, while townhouses are inherently adaptable when it comes to design.
If you prefer a small gazebo, an edible fruit garden, or a stone walkway, you have the option of opting for these upgrades as you have more control over customization. Technological and design innovations are all part of this design flexibility.
RPM has recognized that developers are increasingly aware of these property market preferences and are beginning to integrate more distinctive products into their market offerings in and around Melbourne.
Townhouses are becoming increasingly attractive to buyers as longer-term work-from-home arrangements allow buyers to look further afield and not be tied to certain offices.
As a result, RPM forecast both strong demand for townhouses and increased supply of townhouses over the next 12 months as developers continue to incorporate these products into their master plans.