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Feature Article: Townhouses The Way Of The Future?
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Jason Round

TOWNHOUSES THE WAY OF THE FUTURE?

 

Construction of new detached homes is booming, with the Housing Industry Association predicting in their latest National and State Outlook Report that a total of 130,000 new detached houses will commence construction in 2021, eclipsing the previous record of 120,000 set in 2018. The market for established detached homes is also booming, with tight supply and strong month on month growth in house prices.

On the other hand, approvals for high-density apartment dwellings are on the decline, with high-density apartments accounting for just 34.7 per cent of total dwelling approvals in 2020. There were significant drops in unit approvals across the capital cities during 2020, with unit approvals declining by 41.6 per cent in Adelaide; 16.2 per cent in Perth; 11.4 per cent in Sydney; 10.7 per cent in Melbourne; and 8.6 per cent in Brisbane.

Dr Andrew Wilson, chief economist at Archistar notes that the downturn in approvals for apartment developments is, “closely matched by a similar collapse in lending to investors which now stands at the lowest level on record (of total home loan market share) – indicating a clear relationship between the two.” Not only are approvals for new apartments on the decline, but the established apartment market is also subdued, with significantly higher supply levels than for detached houses and limited or no growth across the nation.

 

Apartments Melbourne

 

So, on the face of it, it appears that detached houses are the way of the future. However, there is a third option. Townhouses have become significantly more popular over the past decade as they fill a strong middle ground between high-density apartments and detached housing. Townhouses can offer a more affordable entry point to desirable suburbs than detached houses while still offering significantly more space and privacy than high-density apartments. Townhouses tend to dominate in-fill development in the middle-ring suburbs of most cities where buyers are willing to sacrifice size for location. Such is their popularity in comparison to high-density apartments, approvals for townhouses actually increased in some cities in 2020, with an increase of 7.1 per cent in townhouse approvals in Melbourne and a 31.7 per cent increase in approvals in Brisbane.

Further, many developers are now including more townhouses within master-planned communities. According to RPM Real Estate Group, figures indicate that townhouses now account for up to 15 per cent of homes sold in master-planned communities, compared with just 5 per cent only a few years ago. According to RPM Real Estate Group, the demand for townhouses is being led by price. While still affordable, townhouses also offer better prospects for capital growth than high-density apartments, although they cannot match the growth of detached houses.

 

Beaumont Front Render

 

It is likely that the vast majority of approvals for new dwellings will continue to be for detached houses and that the established market for detached houses will continue to outperform the high-density apartment market. With closed borders halting immigration for the near future, an existing over-supply of high-density apartments in many suburbs and limited natural population growth, it is unlikely that approvals for high-density apartments will increase any time soon. However, according to Dr Andrew Wilson, medium-density townhouse approvals will continue to be resilient in comparison as there will continue to be a strong demand for townhouses that offer more space than apartments while providing cheaper access to desirable suburbs than detached houses, particularly in the popular inner and middle-ring suburbs.

If you’d like to learn how you could capitalise on the changing property market trends, request a tailored 1:1 strategy session with a Senior Property Coach today, completely FREE.

 

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WEEKLY ARTICLES

Lease Signs

CAN INVESTORS SAFELY RETURN TO THE RENTAL MARKET?

Rental demand saw a significant decline in 2020 as COVID-19 impacted the property market. Is the tide about to turn?

PRD chief economist Dr Diaswati Mardiasmo has said it could be argued that the past year saw “unfriendly investment conditions”, including rental moratorium policies that worked against mortgage freezing policies, HomeBuilder targeting first home buyers and owner-occupiers, and high investor home loan rates.

All of those factors ultimately put landlords at a disadvantage, resulting in many investors hesitating to act in the market over the past months, Dr Mardiasmo said.

However, recent data on supply, rental yields, vacancy rates and cost of lending could be pointing to a recovery trend beginning, according to the chief economist.

Full Article Here.

Westpac Feature

WESTPAC OFFERS LOWEST TWO-YEAR FIXED RATE HOME LOAN ON MARKET

Westpac has begun offering the lowest two-year fixed-rate home loan in the market, slashing rates to well below 2 per cent.

The big four bank and the second-largest in Australia cut 0.20 per cent off its two- and three-year fixed rate home loans for new owner-occupiers and its two-year investor fixed rates.

Westpac’s two-year fixed rate home loan for owner occupiers is now 1.79 per cent. It’s three-year fixed rate is now 1.88 per cent.

Research director at RateCity.com.au Sally Tindall said the big banks are competing to secure commitments from buyers keen to enter the red-hot property market.

“Westpac has thrown down the gauntlet to its competitors today proving there’s still heat in the fixed rate market,” Ms Tindall said.

Full Article Here.

Mansion Feature

INVESTORS FLOOD BACK TO MARKET LOOKING FOR A PRESTIGE HOME

Rock-bottom interest rates and a strong economic outlook have seen investors flood back to the property market across Australia, with some even targeting luxury properties.

Able to borrow more money than ever, those in the industry say investors are favouring houses over units, pushing their limits to even buy prestige in order to capitalise on an undersupply in the market for high-end rentals.

“There are definitely more investors popping up in the housing market, more than we’ve typically had,” Ray White NSW chief auctioneer Alex Pattaro told Domain. “Although we are seeing the apartment market now bounce back and investors and first-home buyers are buying in.”

The return of investors was a great sign for the market, Mr Pattaro said, with people far more confident they will find tenants able to pay the rent after a tumultuous year for landlords throughout the COVID-19 pandemic.

Full Article Here.

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