The secret is getting out. This segment is a gold mine.
Townhouses are the new black.
I’ve been saying this for a little while now, but I wonder if people really get the long run drivers that are lining up behind the townhouse segment.
And I’ll let you in on a little secret. This is the segment that excites me most right now. It’s where I’m putting my money. I’ve got three substantial deals in play right now, all less than 500 metres from my office.
If you want to know the details, I made a few videos about them. Have a look here.(this is a video I made for last years Xmas sale – so ignore the chat about that)
In many ways, townhouses have been Australia’s quiet achievers. The Australian mythology still attaches itself to the sprawling quarter acre block, though that style’s heyday is well and truly behind us now.
At the same time, most commentators eyes have been on the emergence of the high-rise sector, as our CBD landscapes have been recast, and people worried about whether anyone would ever live in these “dog boxes in the sky”.
But in the shadows of all this, townhouses have quietly gone from strength to strength.
And the number of townhouses getting approval each year has more than doubled over the past five years, in NSW and Victoria. In NSW, they’re now adding 13,000 a year. In Victoria it’s about 10,000.
This is at the same time that the growth rate for detached housing approvals has actually turned negative. That is, the number of approvals this year was less than the number approved last year. That’s in both NSW and Victoria.
This is a structural trend. This isn’t about the housing cycle. This is about a restructuring of the housing market in Australia, away from detached housing.
The drivers of this are reasonably easy to identify.
And largely it’s about economics. People are hungry for affordable housing options, and townhouses offer something that is cheaper than house and land, but with more privacy and amenity than high-rise.
A lot of families I know could see themselves in a townhouse, but wouldn’t really consider apartment living.
The politics of townhouses is interesting too. Politicians are under pressure to provide more housing to cater to our booming populations.
However, local residents value their leafy amenity, and don’t really want to see a skyscraper go up next door to the kindy.
In that sense, townhouses offer a sort of political middle ground. They allow councils to meet their housing targets, but in a way that doesn’t get the NIMBY brigade too offside.
And look, high-rise design has come a long way, but they do change the feel of an area significantly. On the other had, townhouse design can be a lot more flexible, and often fit in much more harmoniously with the existing streetscapes.
The other driver is lifestyle. Modern life is more outwardly-orientated. We just don’t spend as much time at home as we used to, and that’s a great thing.
But it means that people want their home to be functional and comfortable, but they put a lot of value on location and amenity too.
And that’s created a really interesting segment – and a really juicy segment. Luxury townhouses.
When townhouses first entered the scene, it was as a kind of poor man’s house. That is, if you couldn’t afford a full house, you might settle for a townhouse.
And townhouse design reflected that economics – it was cheap.
These days though, people are valuing location and amenity, and want their townhouse to reflect their aspirations.
They want all the fittings, they want the appliances, they want the designer feel.
There is a market, and a growing market, for high-end townhouses.
20 years ago, the phrase “high-end townhouse” didn’t even make sense. Today, it’s a lucrative segment.
And so if you look at the deals I’m doing, I’m using these long run drivers to my advantage.
I’m backing council demand for urban infill, I’m positioning my developments well, and I’m aiming at the upper end of the market.
And right now, it’s working out very nicely. In the three deals I share with you in the videos, I’m looking at making a million dollar profit off each one.
I’m happy with that.
So yeah, townhouses are the new black.
And we haven’t seen anything yet.