Love them or loathe them, townhouses are a major feature in our biggest New Zealand cities – and with more and more constructed every month, many in the market to purchase a property will find themselves considering whether it’s a good idea to buy one.
To be honest, there is a lot of negativity in the market towards townhouses. But despite this, the number of townhouses continues to grow and for a lot of developers, they represent 90% of their stock. Townhouses aren’t new – they’ve been around for many, many years. In Auckland, they’ve become accepted as a reasonable choice for homeowners, but that really is yet to happen in Christchurch, even though it’s the biggest city in the South Island. These are two markets that I know well, having lived in Christchurch for 17 years and now travelling very frequently to Auckland, so it’s interesting to compare the attitude to townhouses in both cities.
There’s no strict ‘right or wrong’ when it comes to the option of buying a townhouse. If you’re considering it, what’s crucial is to start with the question of why you want to buy a townhouse in the first place.
For owner-occupiers living in Auckland, the answer is straightforward. With prices as they are, the townhouse option will look pretty good as it is likely to be the only option if your budget is under $650,000. For this price, you can find a nice, brand-new townhouse in South Auckland or, if your budget is $750,000, you might be able to buy in central Auckland or out west. If your budget is $850,000 to $900,000, the scope is even wider and you might find something really nice in the central suburbs.
Nathan Miglani from Squirrel Mortgage Brokers
In Christchurch, it’s a completely different story. Townhouses start at around the $469,000 to $479,000 mark. You’ll probably pay around $479,000 to $489,000 for the typical ‘two-bedroom, two-bathroom and a carpark’ and this would go up to about $550,000 in a suburb that’s a bit more established. A budget of $650,000 could get you a townhouse in one of the very decent suburbs around the city.
If you’re a single professional or a young couple with no children, in the early stage of your professional career, working hard and wanting to enjoy life, buying a townhouse is not a bad option because of the convenience offered by a more central location. The opportunity to buy brand-new, with minimal maintenance required, will be a big advantage.
... buying a townhouse presents the option of renting the property out when they head overseas – with a home base to come back to in a few years ...
There’s also the reality that a lot of people at this stage of life will be looking around for other opportunities, whether it’s another city or another part of the world, and buying a townhouse presents the option of renting the property out when they head overseas – with a home base to come back to in a few years when they’re ready to settle down. If this is your plan, then you need to be thinking ahead as to whether this will be an easy property to rent out – something in a prime location, perhaps the central city, will always have an advantage when it comes to future rental potential.
There is a segment of owner-occupier buyers in Christchurch who are young professionals and like buying townhouses for these reasons. We have plenty of previous clients who fit this category; young professionals who bought townhouses in the central city and have since rented them out and relocated to the UK or Aussie.
There is also a large segment of owner-occupiers who have relocated to Christchurch from Auckland, and they are also buying townhouses. Talk to any established Christchurch developer and they’ll tell you there is a chunk of buyers coming from Auckland and buying townhouses, because they’re used to the idea that this is what you can and should buy.
Adding to the readiness of ex-Aucklanders to buy townhouses in Christchurch is the underlying perception that remains following the earthquakes of 2010/2011, that older houses, built pre-earthquakes, might be a risky option. Those that live in Christchurch are generally familiar with terms like ‘EQC’, ‘scope of work’, ‘completion certificate’, ‘PS3’, ‘PS4’ and ‘engineers’ report’ and what they all mean for the process of buying a house. Those coming from Auckland, however, have no idea – absolutely no idea! – so it’s quite hard for them to trust a property that’s older and has had EQC repairs, so this adds to the likelihood that they’ll end up buying a brand-new townhouse.
... the underlying perception that remains following the earthquakes of 2010/2011, that older houses, built pre-earthquakes, might be a risky option.
We’ve helped a lot of Aucklanders moving to Christchurch over the last couple of years as the Auckland market keeps moving and I believe that over the next few years we’ll see a lot more young couples relocating south. With incomes more or less the same and an increasingly vibrant central city, the lifestyle is fantastic with much less traffic and easy access to the outdoors, whether it’s Hagley Park for your walks, beaches 15 minutes away, biking in the Port Hills and skiing just over an hour away. Christchurch has a lot to offer young people!
When you talk about townhouses with the local community of Christchurch, it’s a different story. In general, locals aren’t particularly excited about townhouses. Honestly, good luck trying to sell a $650,000 two-bedroom townhouse as an investment to locals when they can pay the same price for a three-bedroom, brick-and-tile, standalone house on a 600 sqm section in an established suburb like Redwood, Belfast, Hoon Hay, Burwood, Parklands or New Brighton. There is just such a variety of affordable properties with big sections in established areas on offer. Some may have renovation possibilities, some may have subdivision potential, some may present other opportunities that someone who’s not a Christchurch local might be unaware of.
The data supports this. Here in Christchurch over the past six months, 95% of deals our office has done for first-home buyers has been for existing, standalone properties, with only 5% buying townhouses. And who has been buying those townhouses in Christchurch? Mostly Aucklanders.
And who has been buying those townhouses in Christchurch? Mostly Aucklanders.
If you’re a local looking at buying in Christchurch, you will also have seen the market soar in 2021, when people were paying $650,000 to $700,000 for two-bedroom townhouses that are now sitting at around the $520,000 to $530,000 mark, depending on the area, and this adds to the negativity around townhouses.
If you’re looking for a home in the competitive Auckland market, however, the recent softening has put some great options within reach of buyers. We recently helped a couple buy a brand-new three-bedroom townhouse in Blockhouse Bay for $775,000. Our clients are delighted to have secured a three-bedroom, two-bathroom, single garage property, built by an established builder in a pretty good suburb, because similar properties were selling for $900,000 at the peak of the market. Any good real estate agent in Auckland will agree that the townhouse stock in New Zealand’s biggest city is the highest they have seen in 15 years, so it's a good time to buy if you are in the market.
But what about investors? Shouldn’t they be buying townhouses? In my experience, when investors buy townhouses, they rely a lot on the marketing and this isn’t always the best strategy. It’s easy to be swayed by beautiful renders and a good sales pitch, but I strongly urge people to get some solid financial advice – and to very seriously reflect on the question of whether they would get their money back if they ever had to sell the property. With an investment, you always need to look at the long-term gain. If you need to get your money back at some point in the future, the last place you want to be is stuck trying to sell a property that nobody wants to buy. To avoid regretting your purchase later on, you need to be sure that you’re making the right decision.
When it comes to buying a townhouse, it’s not a case of right or wrong. You just need to ask yourself the question: is buying a townhouse helping me achieve my goals? If the answer is ‘yes’ and if you like the townhouse and the location, it’s okay to buy a townhouse, it’s perfectly fine! If I was single and had no children, I wouldn’t mind living in a townhouse right in the middle of the city, especially in Christchurch, which has so much to offer. And if you compare Christchurch prices to Auckland prices, it’s a good time to buy because you can still get a good townhouse from an established developer and close to the city.
... if you like the townhouse and the location, it’s okay to buy a townhouse, it’s perfectly fine!
So, in the end, it’s a tale of two cities. If you’re in Auckland and buying on a budget under $650,000, a townhouse is probably the inevitable option. If you’re in Christchurch and you’ve fallen in love with a nice townhouse in a good suburb like St Albans, and you think it could work as a home in the short term and a rental in the long term, that’s a reasonable buy. But if you’re thinking purely as an investment, you really need to think twice because there are a lot of good-value choices out there for buyers!
Message from the Author: Please remember, these are just my personal views and should not be considered financial advice. Everyone’s situation is different and you need advice tailored to your specific needs. If you have any questions or comments, please contact me directly (nathan@squirrel.co.nz).
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