Brisbane townhouse - thoughts

I'm wondering how well townhouses have fared in Brisbane in terms of Capital Growth.
Obviously houses are valued for land however entry point is higher.

I have an opportunity to purchase a 5yo townhouse (3/2/2) 8 km from Brisbane cbd with good rental opportunity (0.8% vacancy in that area) for investment but I'm not sure if I'm better off waiting for a house instead. I noticed the townhouses I that area ranged from $450-600k on the property pages so it's not clear what the market price is or where the market is heading

 

Lots of townhouses in Brisbane so the general advice is avoid, however that being said I have purchased one there. It's the one and only townhouse in my portfolio. Reasons being:

1) It was in a suburb that isn't flooded with townhouse developments. I went street by street and I think I counted literally 6 in the whole suburb (compared to hundreds in suburbs like Runcorn or Calamvale...if you ever went for a drive there you'd be shocked to see just how many there are).

2) It was like 500m walk to a retail development which I think is going to have huge (positive) ramifications on surrounding properties. It was a bit of a "talk of the town" sort of development, sparking all sorts of excitement.

3) Surrounding full standing homes were 2x the price. For the same price, I could have bought a full house about 15-20 mins away, but I couldn't take my eyes off #2.

There are good townhouses to be found, but they are very rare. You can't buy them as indiscriminately as you would in Sydney or Melbourne.

If you'

 

This one is part of townhouse development I believe in Everton Park
My concern was that there were too many townhouses there

 

And they want $510K and for a bit more I could be buying a house

 

As jay said above you need to be very selective and Everton park isn’t a suburb for townhouses IMO I would only ever buy houses in Everton as it’s a family dominated suburb. Houses with 600sqm are only 20% more

 

What Jaybean said is correct.
Hit it right on the spot. Those would be my criteria.

Example - I have 1 townhouse that is surrounded by $1m place in a pocket 10 mins walking distance to shopping center / train station and bus station.
As well as the street is zone for 3 levels. Next street is zone for 8 levels.
Guess what will happen in 10 years time? Rezone is almost certain.

 

It is very difficult to track the performance of townhouses because most data houses group townhouses together with units and we all know the performance of each may be very different.
I'm a bit of a data nerd, so we did some of our own data crunching for townhouses to see if we could see any price trends ...
I looked at 134 townhouse sales in suburbs within 8km of the Brisbane CBD that sold between 2018 and mid 2020.
I then tracked backwards to see what the same townhouses previously sold for (so to qualify the property had to have had at least 1 previous sale in its history)
Then I calculated the ACTUAL capital growth rate for every property based on first and subsequent sale ...
Then I looked at the growth rate per year ... (because the timeframe between sales differed a lot)
AND ...
I found the average growth rate per year was 2.59%
AND...
The median growth rate per year was 1.71%
This is definitely inferior to the housing market.
Told you I am a data nerd
Hope this helps!

 

I think you've answered your own question here. Particularly if they're new/off-the-plan.

- Andrew

 

Correct Andrew- thank you everyone for your thoughts this discussion has been very helpful!

 

Nice! Im sure will need your expertise as soon as Ms. Anastasia opens up Brissy. I like nerds

 

My friend got burnt for buying a new townhouse in the south side of Brisbane. His property has minimal growth for long time while the medium price of houses in the same suburb went up significantly. The government encourages higher density living which leads to oversupply of apartments and townhouses. Houses are a better bet due to more limited supply.

 

It all comes down to the old adage "land appreciates, while buildings depreciate". Townhouses are usually newly appointed buildings on 100-150sq/m. So given the "standard" block size for a free standing house in inner ring Brisbane is about 500-600sqm, that is about 4x more land value, and definitely not 4x more expensive.

 

Whilst this is true in a broad sense, it's not the only consideration and for an investor it applies less because they are not limited to a given purchase area where the country is the playground. There are many examples of townhouses and units out performing houses on a countrywide basis and this is macro approach an investor should be taking, not necessarily comparing whether a townhouse outperforms a house in a given area or suburb (where generally this adage would be true). As a example, I have a few houses in Brisbane and my units in Sydney have all outperformed them.

This is generally because premiums are usually built into the price on new builds to pay for various expenses, such as marketing. They sell the concept of the higher price by marketing that it's new and for investors, has higher depreciation. However, usually a quick search of similar dwelling types in the suburb or area reveals the true value. Remember, like a new car, once you settle it's not longer new. I've personally seen developers of both med/high density and house & land packages get the first few sold and then use those valuations to support their price point for further sales. It doesn't work so tread carefully (this is aimed at anyone reading considering this type of purchase).

As @gman65 has said, for a given area you are far better looking to buy a house.

- Andrew

 

Well said. I was close to buying a new property as my first property. Luckily, a close relative pulled me away from the deal. This experience made me spend a lot of time studying property investment before pulling the trigger. A lot of developers pay the sales companies big dollars for marketing and selling. Inexperienced buyers do not know where to start and often end up following the "advice" from the so-called "property strategists/consultants".

 

In the first iteration of MyPropertyPro, we would get called on a weekly basis from those types of people and companies, being offered up to (and I'm not joking here) $50,000 per property (generally somewhere between $20-30k) to recommend OTP house & land or apartments/townhouses to our clients.

Every single time I explained that we were not in the business of selling any type of property to our clients, and in fact routinely sent out communications warning of buying overpriced OTP stock and recommending against bad investments such as that. Some shrugged it off, some took it quite badly and I had many a debate with slick salesmen who had been in the industry 5 minutes thinking they were the bees knees when it came to property investment. There were always the same excuses as to how they could afford to simply give us $50k to send a poor unsuspecting client to the lion's den.

To this day they're still around which is why it's so important that property investment becomes regulated under the Corporations Act. PIPA is doing a great job lobbying for this and hopefully, in time, it will happen. It's one of the core reasons our company pays to be a corporate member of PIPA and I'm a QPIA. Until it's regulated people will have to do their own research and protect themselves. Unfortunately, people love 'free advice' over paying up front for it which is why these companies and individuals are so successful. At least this site and others like it is a resource to help educate and avoid so we'll keep fighting the good fight.

- Andrew