Townhouses have become a popular choice for property investors due to their unique balance between affordability, convenience, and potential for rental income.
If you’re considering adding a townhouse to your portfolio, it’s essential to weigh the pros and cons to determine whether this property type aligns with your financial goals and strategy.
The Pros of Investing in Townhouses
At TGC Homes, we’ve seen these benefits firsthand through client experiences and feedback, highlighting how our developments meet the needs of modern property investors.
- Affordability Compared to Standalone Homes
Townhouses are generally more affordable than standalone homes in the same area, allowing investors to maximise their purchasing power and enter the market with less capital. - Low Maintenance, Lock-and-Leave Lifestyle
Designed for convenience, townhouses are perfect for investors looking for properties that require minimal upkeep. Their "lock and leave" appeal makes them especially attractive for tenants seeking flexibility, such as professionals and retirees. - High Demand in Prime Locations
Townhouses are often located in desirable areas close to amenities, public transport and schools. This makes them ideal for a range of tenants, ensuring consistent demand and good rental income potential.
In Dunedin, the demand for new builds is particularly significant due to the city’s low rate of new dwellings consented per capita. Over the past decade, Dunedin has averaged just 3.4 new dwellings per 1,000 residents, the lowest among major centres in New Zealand. This starkly contrasts with areas like Queenstown-Lakes, which averages 25.8, and Christchurch, which averages 9.3.
This underlines a growing need for modern, well-designed homes within the city, ensuring strong occupancy rates and ongoing demand for townhouse developments. - Versatile Rental Opportunities
- Airbnb Potential: They’re well-suited for short-term rentals due to their modern layouts and prime locations.
- Boarding Houses/University Housing: Dunedin’s large student population creates a steady demand for rental properties, and townhouses are ideal for shared accommodation, ensuring a high tenancy rate.
- Future Investment: Some investors purchase townhouses as long-term assets to secure future housing for their children while generating income in the meantime.
- Modern Features Tenants Love
With energy-efficient designs, stylish layouts and easy-to-maintain interiors, townhouses are designed to meet the expectations of today’s renters, ensuring they remain competitive in the rental market. - Strong Rental Yields
Thanks to their affordability and steady demand, townhouses often deliver good rental income. They can balance cash flow while offering long-term capital gains potential. With energy-efficient designs, stylish layouts and easy-to-maintain interiors, townhouses are designed to meet the expectations of today’s renters, ensuring they remain competitive in the rental market.
The Cons of Investing in Townhouses
- Limited Land Ownership
Townhouses are typically built on smaller plots of land compared to standalone homes. Since land often appreciates faster than the property itself, this could impact long-term capital growth potential. - Market Competition
In areas where townhouse developments are common, oversupply can become an issue, potentially affecting both property value and rental income. However, this is less of a concern in Dunedin, where fewer new homes are being built compared to other regions. This scarcity reduces the risk of oversupply and keeps demand high for modern townhouses. - Dependent on Location
The success of a townhouse investment heavily depends on its location. Townhouses in well-connected, high-demand areas perform well, but those in less desirable locations may struggle to attract tenants or buyers.
Is a Townhouse Right for Your Investment Strategy?
Investing in a townhouse can be a lucrative decision if it aligns with your overall goals and market conditions. These properties offer an excellent balance between affordability and rental appeal but require careful consideration of associated costs and limitations.
Key Questions to Consider:
- Does the location have a strong demand for rental properties?
- How does the potential rental yield compare to other property types?
- Is there an oversupply of townhouses in this area?
Investing in townhouses can be a smart decision when aligned with your financial strategy and paired with a reliable developer. At TGC Homes, we’re proud to offer low-maintenance, tenant-friendly townhouses in high-demand Dunedin Locations.
