Source: Radio New Zealand
Herne Bay is usually the country’s most expensive area. Supplied/ CC BY 2.0 – GPS 56
Townhouses are giving buyers a cheaper way in to even some of the country’s priciest suburbs.
There has been a boom in townhouse construction over recent years, particularly in Auckland and Christchurch. In the past five years there have been a total of just over 48,000 townhouses, flats and units – not including apartments and units in retirement villages – consented in Auckland.
But the cheaper price point of townhouses has made some suburbs accessible to first-home buyers who might previously have been priced out.
Cotality head of research Nick Goodall said the cheapest townhouses in the country compared to the median value of standalone houses were in Herne Bay, usually the country’s most expensive area.
There, townhouses cost a median $936,000 and houses $3.03 million.
That was followed by St Mary’s Bay, at $852,000 and $2.87m and Parnell at $886,000 and $2.87m.
Mt Eden was fourth, with a median townhouse value of $703,000 compared to a median value of $2.13m for houses.
Goodall said the data probably reflected how expensive houses were in those suburbs.
Cotality head of research Nick Goodall. Supplied / Cotality
“It’s also reflective of how expensive the land is in those suburbs because they’re close to town and land is more expensive the closer you get to town.
“So that gap widens for a townhouse which doesn’t necessarily get any or much use of land, it’s more about the structure itself. That’s why generally speaking you see a cap on the value of a townhouse.”
He said town houses had been staying on the market for longer and owners and developers had been having to drop their price more to sell during the period that the market had been softer.
Over the past 12 months, standalone houses had seen value falls of -0.7 percent, with -1.7 percent for townhouses, and -4.1 percent for apartments. But since the peak, the price of houses in Auckland was down 23.5 percent compared to 22.2 percent for townhouses and flats.
He said townhouses were a good option for people who wanted to get into the central suburbs and could not otherwise afford it.
“If a buyer is looking at their list of wants and needs and location is on there and that’s more important for a period of time, whether that’s five, seven, 10 years, until you might be thinking about having children or you need a bigger space … even for a young child it’s probably fine, it’s when you get to a bit older you might start thinking about [moving]. It’s all about age and stage and using it to build equity and all those things.”
While apartment values have tended to lag houses, Goodall said that would be less true of townhouses.
“They still seem to be doing pretty well through the cycle whereas with apartments it’s a bit different … you really have no apportionment of land … when you look at the 10 or 20 year performance apartments just do not see that same growth that houses would … with townhouses the difference is much less.”
He said the difference in price movement would be less in a “normal” period where there had not been so much building. “I think you will probably see houses perform better because they have more land and a lot of value is in the land … but townhouses are not completely devoid of it.”
Simplicity chief economist Shamubeel Eaqub.
Simplicity chief economist Shamubeel Eaqub agreed the difference was the land. “When you buy houses in New Zealand you’re buying the land. It’ s a land speculation engine, right? When you’ve got townhouses you don’t have a lot of land and also it comes with issues of shared title and whatnot.”
He said there would also be a price difference but it provided options and choices.
“Would I expect those prices to just converge to standalone house prices? No. Will the gap fluctuate over time? Of course.”
He said there could also be a range of quality within the townhouse market. “The concern I have is around the lowest cost to build, the designs are often not good for things like ventilation, noise – a lot of the houses built during the Covid period where inspections weren’t able to be done physically. We don’t know what kind of problems might be stored up there.
“The liveability and reliability are the two things that I worry a little bit about … a lot of that can be fixed by design which I think we will get to but there’ll be a cohort of people who will be in houses that are cheap to buy but uncomfortable to live in.”
The areas with the biggest decline in town house prices the past year were Omokoroa, Western Bay of Plenty, down 17.9 percent to $711,000; Whalers Gate New Plymouth, down 15.3 percent to $437,000; and Waihi Beach, down 14.7 percent to $782,000.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
