Why Are So Many Townhomes Being Built?

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Who wants a townhouse? Everybody wants a townhouse! Boomers, Millennials, singles, divorcees, newlyweds, young families, first-time buyers, empty nesters – townhouses are soaring in popularity among all age groups. What is driving this trend?

Recent waves of outside-the-box housing ideas have brought us teeny-weeny homes, converted shipping containers, modern prefab palaces, and co-housing apartments with luxe perks for millennials.

But the latest “it” homes with builders and buyers have been around since the 19th century.

Townhouses, those classic rows of attached single-family homes that are a fixture in American cities and suburbs alike, got a second wind in the 1960s. That’s due to folks scooping up these existing, and often inexpensive, older abodes as they moved back into the big cities. And now, the lovechild of a condominium and standalone house is back again and hotter than ever with both buyers and builders.

What Is a Townhome?

Many people ask the question, “What is a townhome?” Townhomes are tall, narrow, traditional row house, generally having three or more floors. In general, townhomes consist of a multi-story home in a modern housing development attached to one or more similar houses by shared walls.

The most visual difference between townhomes and traditional houses is their structure. A townhome is attached to at least one other townhome that usually looks very similar to the first. A traditional house is a single structure that does not share any walls with other houses. Regular houses don’t necessarily have more extensive square footage or more rooms. They DO tend to be more compact than a single-family house, making them excellent options for young families and retirees. On the other hand, a traditional house can more easily accommodate larger families who may need or want more room daily.

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Why Townhouses Are The Next Big Thing?

Over the last five years, medium density housing (townhouse, terrace and semi-detached) has become more popular than ever before, with the latest research suggesting this trend is set to continue over the coming years. As the cost of land skyrockets and the great Australian dream of a big backyard becomes unreachable for many, the humble townhouse is making a comeback. For property investors seeking to build a diverse portfolio, it is essential to understand why a townhouse has such great and growing appeal across all the major Australian capital cities and how the types of townhouses being developed are changing to adapt to the needs of an increasing population.

Be a Lazy Bum, Have a Nice Yard

Granted, that little piece of planet Earth that comes with the purchase of your townhouse isn’t going to be huge. It’s going to be a patch of grass, maybe a shrub or a flowering tree, possibly a petunia border.

Here’s where the homeowner’s association comes in. You pay dues every month to these folks, and they take care of that patch of grass. And you are repainting the exterior. And re-shingling the roof. And you are blowing the leaves out of your parking space. If you live in a less than tropical locale, remove the snow in the parking lot.

You can probably plant a row of rose bushes along the front walk if you’re so inclined, but no one will look askance if you don’t. You need never throw out your back bending over to pull one stupid weed again.

Of course, every HOA (as the homeowners’ association likes to call itself) has a different list of maintenance items it’ll take care of, so you’ll want to make sure you all agree on who has to do what in the yard. But often, the HOA would prefer you keep your flamboyant red hot pokers (calm down, it’s a flower) and bright pink window shutters away from the manicured front lawn.

Never Leave the Compound

When you buy a townhouse, it comes with a community, and that community has amenities. Most townhouse developments have a gym, a pool, a laundry room, tennis courts and even a recreation room that owners can sign up to use for parties.

Say your townhouse community doesn’t have one of these things, like tennis courts, and you know in your heart that you are the next Roger Federer or Serena Williams. (You’re not, but let’s go with the example.) In many townhouse communities, owners can pool their money to get these facilities added, as long as there’s room to add such things on the property.

Officially, as a townhouse owner, you own a percentage of each of the common facilities. So if there are 50 units in your development, you own 2 per cent of the laundry room. If you choose to think of one of the sofa cushions in the rec room as your 2 per cent, go ahead, but be aware that almost no one else in the development will agree with you.

Keep Your Cash

Often, townhouses are cheaper than free-standing houses, or single-family homes, as they’re known in the real estate biz. Sure, once you buy a townhome, you’ll be paying a mortgage and HOA fees, while your friends in a regular house are only in for the mortgage. But you know what else they get? A yard full of weeds, a driveway full of snow and a roof full of leaks. Who wants an HOA now, huh?

Townhouses are usually, but not consistently, multilevel affairs that share a side wall or two with another townhouse. They can have as many bedrooms and bathrooms as fit in the floor plan, just like a single-family house. They can be close to the city centre or out in the ‘burbs surrounded by vineyards or forests. The point is, you can get a lot of the same stuff in a townhouse that you can find in a regular house, but you typically pay way less for it.

Sometimes you can find better stuff in a townhouse — that is if you’re willing to share a wall or two. Townhouses are often newer than single-family homes on the market, so the floors and walls won’t slope like a funhouse. Townhouses sometimes have the fancy upgrades built right in that you otherwise couldn’t afford in a house, like granite countertops and high-end stainless steel appliances, or hardwood floors, or eco-friendly materials like cork and bamboo.

Keep Tabs on the Neighbors

Hey there, Nosy Nellie, have we got a townhouse benefit for you! The units are close, and the parking areas are often shared, so you can sit by the window and watch everyone come and go all day and all night. There’s another way to save money: Watch the neighbours instead of TV. You can ditch the cable bill.

The truth is, a bit of Nosy Nellie-ish behaviour does benefit the neighbourhood. Being part of a townhouse community means neighbours are more likely to know one another and therefore know if someone new is creeping about with a black eye mask and a canvas bag slung over his shoulder. If Nosy Nellie knows her neighbours are out of the house, she’ll be more suspicious of noises next door when she puts the empty glass between the wall and her ear.

According to Joan Rogers, the real estate agent, “many developments have rental caps as far as how many units can be rented out at a time,” say ten out of the fifty in the development. Owners have a stake in the development; renters, not so much. With less turnover, the neighbourhood is more stable, and Nosy Nellie knows who to smile at and who to give the ol’ stink eye. And if there’s more stink eye than smiling, there’s always the HOA to appeal to the renters.

Have the Neighbors Keep Tabs on You

There can be a real advantage to having neighbors close by while not being in a ‘retirement home’ and still benefiting from building equity.

There’s a lot to be said for less yard maintenance, on-site exercise and laundry facilities and knowing neighbours when you’ve had a little mishap. Or a big accident. However big your mishaps tend to be, townhouses mean there is likely someone around most of the time to help you.

Is There Any Privacy When Living In A Townhome?

When considering a new home purchase, the most significant difference between townhomes and houses and the most frequently mentioned con associated with townhome living is probably the issue of privacy. However, this is essentially a misconception as sound insulation and quality construction eradicate many of the privacy concerns. Besides, townhomes offer many benefits of living in a community, while a house is much more independent. What are some of the privacy concerns associated with townhomes?

Party Walls

For townhomes, party walls can be defined as any wall that divides a building into two or more separate homes. A traditional house may have neighbours that are far away or relatively close, but it will never share a wall with another house. While sound pollution is a genuine concern and could be quite a deterrent in the past, modern quality townhomes should be designed to keep normal noise levels to a minimum for other tenants in the adjoining building. This can be done by using quality soundproofing and building materials used to build the walls and the arrangement of rooms in each townhome (e.g. using closets to act as a buffer between each dwelling).

Associations

Most townhome communities have some association or organization that governs the community. This helps everything run more smoothly since more people live in a smaller area than those living in individual houses. When looking at a townhome for sale, it is essential to consider whether one will be able to abide by the restrictions dictated by the association. Out of a desire to keep the community looking well-kept and organized, there are often specifications for how the townhouses’ exterior may be decorated. Also, it is common to have restrictions concerning pet size and breed to help ensure community peacefulness and safety.

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Townhomes are an excellent solution for those who enjoy being part of a community, while houses offer more independence. Take advantage of the unique environment experienced by those who live in a townhome community. Feel free to ask the current residents of the community what their experience has been like. As with any housing arrangement, it differs from place to place and from individual to individual!

Four Factors that Drive Townhome Popularity

Many of the defining characteristics of townhomes appeal to all types of buyers:

Cost

When compared to an equivalent single-family home, townhomes are usually less expensive. One reason for this is townhouses generally have less square footage than detached single-family homes, which helps control costs. But even if the square footage and amenities of the townhome are comparable to a detached house, townhouses still cost less because they don’t come with as much, if any, land or yard. Long-term maintenance costs are typically lower too, as well as utilities, depending on the townhouse’s size. Those with shared walls, for example, often have added insulation benefits and don’t require as much energy to heat or cool as standalone structures.

Convenience

Many people find townhouses to be easier to own than single-family homes. Since there’s no yard, there is practically zero outside maintenance required of the homeowner. In many townhome communities, a homeowner’s association manages the external maintenance, including landscaping, lawn care, snow removal, and sometimes even roof and siding maintenance. Without home maintenance demands, homeowners can better enjoy the amenities the community may have to offer, like the pool and fitness centre or neighbourhood events. Some communities have 24/7 security guards, gated entryways, and cameras all around, giving peace of mind to those who travel often or are simply away from home most of the day.

Availability

As land prices went up, so did building permits for townhomes. Builders can fit more units on a land plot when they make townhouses than building detached single-family homes. This has led to an increase in the number of available townhomes, thereby fueling townhome purchases. Sometimes, townhome communities are marketed toward distinct demographics such as retirees, the active adult crowd, or young urban professionals, which fuels demand for townhomes. An increased number of townhomes being built means there are more townhomes available than ever before. This naturally drives up interest and demand.

It’s not unusual for first-time buyers to be locked out of the housing market due to lack of availability. Likewise, those who want to downsize or upgrade from a condo or apartment to a townhouse benefit from this supply increase, as are buyers who prefer living closer to the city centre. Divorcees often opt for townhomes as they adjust to their new single status and change in income.

Location

The location has always been one of the top deciding factors for homebuyers. Today it remains so, but what buyers want from their home’s location is changing. A desire to live near work and amenities is increasing among all demographics. That means townhome developments in urban areas are booming.

While the work commute is essential, access to arts and culture, healthcare, social services, and public transit are equally essential drivers in townhome popularity. As more townhome locations become available in areas with easy access to these amenities and attractions, more people are attracted to townhome life.

Buying a Townhouse

Financing Challenges

Unless you are paying cash to buy a townhouse, you will need to obtain mortgage financing. One of the limitations of these properties comes from the difficulty lenders find in accurately classifying and appraising townhomes. Mortgage financing is more expensive and restrictive for condos. Some lenders choose to underwrite all townhomes as if they were condos, leading to higher costs. Some have more nuanced guidelines. If you are buying in an area with many townhomes, it’s a good idea to find a lender with experience in the area. Maybe even speak to the other owners to find out who they used for financing.

When lenders underwrite condominiums, they place restrictions on the number of units that can be rented rather than occupied by the owner. They may underwrite a townhouse complex the same way. So before buying, it would be good to find out how many units are being rented. Homeowners’ associations often try to restrict the number of units that can be rented as well, so if that is in your long-term plans, find out if it will be allowed.

Prepare Before You Buy

Despite the complications and potential financing costs, townhouses may offer the most attractive home buying option in many urban areas. The multilevel layout and private entry give the feel of a single-family home without the expenses that come from owning and maintaining acreage yourself. Despite the shared wall, a townhouse can feel more private than a condo, yet the homeowner’s association gives much of the same convenience and protection.

If you are in the market to buy a townhouse, talk to your realtor and mortgage professional to make sure you know all the property’s details and obligations in question. Before buying, it’s also wise to consult a financial advisor about how this could impact your budget and whether it’s an investment that aligns with your short-term and long-term goals.

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