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Is a townhouse a good investment?


December 10, 2019 8min read

Fancy trying your hand at becoming a real estate mogul? For the budding investor, a steadily recovering housing market means there is no better time than the present to start building your portfolio.

The perfect entry point, a property such as a townhouse provides an inexpensive and hassle-free investment option. And with demand currently outstripping supply in the Australian market, it’s likely that new and existing townhouse owners can expect to experience greater capital growth—a win-win in our (finance) books.

Proving to be one of the more popular types of real estate currently on the market, a townhouse (or “medium density” property) is a multi-level dwelling that forms part of a row of attached residences. Today’s townhouses fall in with current design trends, mimicking the upscale look of free-standing homes (if you want an example, check out our Hamptons style streetscapes), but just in a uniform manner with their immediate neighbours. With whom they share one (or both) walls.

While the benefits of buying a townhouse are plenty, it’s obviously important to assess the property, area and loan structure against your personal lifestyle and financial situation.

Why would you consider investing in a townhouse?

As populations increase and land becomes more scarce, the demand for townhouses is rapidly expanding, with many people seeing their low-maintenance nature as providing a break from the fast-pace of modern society.

When choosing an investment property it’s important to look through the eyes of a tenant. Those renting a townhouse should be able to reap the benefits of close-by community amenity and a nearly maintenance-free environment. 

The leading demographic in tenant-filled properties, millennials are starting to fill out the housing market in both a purchasing and renting capacity, bringing with it a generational demand for sustainable housing options. Through their space-clever designs, townhouses are fantastic at minimising energy usage and reducing residents overall carbon footprint, making them an attractive option for eco-conscious individuals.

More inexpensive to buy and great for retaining value

By using land more efficiently, townhouses come in much more inexpensive than free-standing homes which, to many, provides an attractive prospect of long-term capital growth. Historically, housing prices tell us that if a dwelling is located in a well-connected estate it will retain it’s purchase value, which ideally should make for a seamless re-sale. 

Due to their low price point (and therefore lower financial risk), banks are also more likely to look more favourably at funding an inexpensive new build rather than a pricey established home. For those worried about build costs and complicated loan processes, our 10/90 contracts (detailed below) mitigate any stresses associated with a regular split contract—helping you obtain finance in a simple manner.

Rent appeal

Usually of most interest to downsizers, young families and couples, there’s a varied and continued demand for low-maintenance housing options. From an investment point of view, a townhouse offers an opportunity to purchase property in a highly-sought after suburb or estate for half the price of traditional housing. This also plays in favour of those renting a townhouse as it gives them the chance to live in a suburb that may be inaccessible to them purchase-wise.

In addition, the ‘lock-up and leave’ lifestyle provided by these homes is desirable, as low-maintenance living becomes a necessity for those who are time poor. Older generations in particular find these communities safe and secure, enjoying the increased opportunity for social interaction through shared amenity.

Built with liveability in mind, master-planned communities are developed with a focus on accessibility, with public transport, shopping and schools all within easy reach. Forming part of a row, each property has been carefully considered to maximise the relationship with surrounding homes, ensuring the best outcome for each lot.

Townhouse vs House: What’s right for me?

Many investors opt for established housing due to the complications that come with financing a build. Typical off-the-plan purchases that are structured as split contracts can prove daunting, as it means the land and construction need to be paid separately and therefore lenders will need to agree to finance both of these payments.

Porter Davis projects in this space are unique for a few different reasons. A hot point for investors, our unique 10/90 contract structure combines both the land and townhouse build costs, plus it means you’re not required to make repayments throughout the build like you would on a traditional construction loan. You simply pay 10% of the total package price upfront and the remaining 90% on completion. If you’re looking to acquire something brand new, this is one of the main benefits of investing in a townhouse. You’ll be able to secure renters before even having to make a repayment, meaning you’re not out of pocket each month for the duration of the build!

Another big pro to investing in a Porter Davis townhouse is we generally don’t sell these homes under a strata title (although again, this is dependent on our agreement with the land developer). What this means is that you don’t have to deal with the strict bylaws that people in dwellings such as apartments do, and it’s less likely you’ll be paying body corporate fees. There’s also a reassuring sense of simplicity; you get all the quality of a Porter Davis build but in a much more condensed process. Choose one of two professionally designed World of Style interior themes and let us do the rest. Plus, enjoy real-time access to the status of your build with our Medium Density Customer Portal.

Overall, connected convenience and a simplified build and finance process are the main reasons to consider a townhouse investment. You can rest assured that, more than ever, there is a steadily increasing demand for these properties as couples, young families and downsizers continue to seek low-maintenance and affordable homes in the areas they love. 

Keen to beef up your portfolio (and keep your hair) with a stress-free home?

Check out our available properties in the Townhouse section of our website or contact a consultant today.

Remember, always seek independent advice

The information provided is meant as a guide only. Porter Davis recommends that all clients seek independent legal, tax and financial advice. Full T&Cs here.