This surge, especially in Auckland and Christchurch, makes investors nervous about oversupply.

Why is that? Because, when there’s too much supply of any property type (compared with demand):

• House prices likely won’t rise as fast
• It’s harder to find a tenant (they have so many rental options)

An oversupply could leave investors stuck with properties that don’t grow in value and can’t generate a strong yield.

#2 – Townhouses have less land (and isn’t it the land that goes up in value?)

You often hear the saying: “It’s the land that goes up in value, not the building.”

So some investors think: “If a townhouse only has 70-120m² of land, and a standalone house has 350-500m² .... then surely the house should grow in value much faster?”

It’s a fair question. Here’s the logic people use:

• In a townhouse, maybe the land makes up 25% of the property’s value. The building makes up the other 75%.
• In a standalone house, maybe 60% of the value is the land and 40% is the building.
• If the land truly increases in value over time, then houses should appreciate faster than townhouses.
• And therefore, houses are the ‘better’ investment.

Now, looking at the data, it’s not true that more land = faster house price growth. There’s more to the story. 

Having more land makes your house more expensive, but it doesn’t necessarily make the house double in value faster.

But some investors still believe that it’s the land that goes up in value. This is one of the points made when people argue that townhouses won’t go up in value as fast as a house. 

#3 – Kiwis are used to living in houses

The Kiwi dream is used to be owning a quarter-acre section. That’s roughly 1,000 sqm of land.

And the average Kiwi home has traditionally been a standalone 3-bedroom house.

Most townhouses have less than 150sqm of land, so they don’t fit the traditional idea of what Kiwis aspire to own. 

More from Opes:

• Are there too many townhouses in New Zealand? (Article)
• Houses vs townhouses vs apartments - Which goes up in value faster? (Article)
• Properties in the future – What will we want in 2034 (Podcast)

#4 – What happens when the new townhouses aren't new anymore?

Another argument is that many townhouses are new, so what happens when those townhouses age over time?

Sure, new townhouses are popular today … but what about in 10-15 years? Will older townhouses struggle to compete with newer builds?

Standalone houses often benefit from renovations or land value appreciation over time. You can give an old home a facelift or build on the back garden. But there’s less room to play with when it comes to townhouses.

What are the arguments for strong townhouse growth?

Now that we’ve taken a stern look at the arguments against townhouses going up in value, let’s take a fair look at the other side.

#1 – Townhouses are more affordable

Everyone can see that townhouses are being built. 

What’s less obvious is that people are buying them. And the reason is simple: standalone houses on big sections are expensive.

House prices have increased faster than incomes, so many Kiwis are priced out of traditional homes. 

When you can’t afford a house, you look for something that’s within reach.

For many buyers, that’s a townhouse. 

In June 2026, the median sale price of a townhouse was $750,000. The median sale price of a house was $1,050,000. That’s according to REINZ. 

So the median buyer paid $300,000 less to buy a townhouse compared to a house. That’s why Kiwis are choosing to live in them. 

As houses get more expensive compared to incomes, more people buy what they can afford. 

That’s why I expect more Kiwis will live in townhouses over time.

We’ve seen similar trends in the past. In the 1960s and 70s, many people built brick “sausage flats”. These days they are known as units. 

These properties are still attractive for renters and home buyers . That's because they are more affordable than larger standalone houses.

#2 – New Zealanders don’t need as much space

Kiwi families are getting smaller. Back in 1976, the average woman was forecasted to have 2.37 children. Today, that has dropped to 1.55 births per woman (Stats NZ, 2025)

On top of that, more Kiwis are living alone. 22.8% of households had one person living there alone, according to the 2023 Census.

We don’t need as much space or as many bedrooms, so the houses we need are changing. That means less demand for bigger homes and more demand for smaller, higher-quality homes.

We call this a move to “compact quality”.

Modern townhouses are all built to contemporary tastes and standards. They also have modern features like double glazing.

The townhouses you see being built represent less of a building boom and more of a shift in how Kiwis (at least in larger cities) choose to live. 

#3 – Our population is growing

We need to put people somewhere.

As more people move to New Zealand (and into NZ cities), houses are being built closer together to fit everyone in.

It wasn’t that long ago that a million people lived in Auckland. 

Now, there are 1.82 million. That’s as of June 2025 (Stats NZ). 

Many people moving to New Zealand from overseas are from high-population countries. Think places like China, India and the Philippines. 

These new New Zealanders may already be used to living in more densely populated cities. 

#4 – Kiwis already choose to live in close proximity for the right property

You sometimes hear the argument: “Kiwis don’t want to live close together.”

And yes, townhouses do bring people closer together than the traditional quarter-acre dream.

But if that were really true, some of NZ’s most expensive suburbs wouldn’t look the way they do.

Take Herne Bay or Parnell. The land has become so expensive that multi-million-dollar homes are packed close together on small sites. 

People live almost side-by-side and yet these suburbs have seen some of the strongest capital growth in the country.

Why? Because ultimately home buyers care more about the house than the backyard. 

And that’s because you do all your living, cooking and sleeping inside the house. So, this is an example where wealthy Kiwis are choosing to prioritise location and house quality over section size. 

And this isn’t just theory – it’s how people already live.

What can we learn from Sydney?

Sydney offers a potential glimpse into where New Zealand's housing market could be heading.

Suburbs like Surry Hills, Redfern and Erskineville are highly sought after by young professionals. That's because they’re only a few kilometres to the CBD.

Here’s a small, 2 bedroom townhouse on Little Riley Street in Surry Hills. It sold for $2 million dollars in October 2025. 

There’s a famous "skinny house" in Erskineville. It's just one bedroom and so narrow there wasn't room for a bath inside, so the owners installed one in the backyard.

It still sold for $1.275 million in March 2026.

Most of the townhouses here are old and pokey, but are selling for over $1 million. 

Why? People are paying for the lifestyle and convenience that comes with living close to the city. The homes may be smaller, but they're exactly what buyers are willing to pay for in that location.

We're already starting to see the same shift in New Zealand.

In Christchurch, 25% of all homes are townhouses. 

Buyers aren't just choosing them because they're more affordable. Many actively prefer a warm, dry, low-maintenance home close to the places they want to be over a larger house further out.

What happens to townhouse values once they're no longer new?

Townhouses don't lose their value once the “new” shine wears off. Cars do that. Houses don't.

Some people make the mistake of thinking new houses are like new cars – they aren’t. 

Take a 2008 Toyota Corolla. New, it might have cost $26,450 to $41,490. Today it's worth $4,000 to $10,000. That's a loss of 70-85%.

Now take a $500,000 New Build bought in Auckland in July 2008. According to Opes' modelling it's worth around $1.2 million in July, 2026. That's a 137% gain.

Cars decline in value over the long-term. House values tend up over the long-term, dips and all.

So what actually ages in a new townhouse? Carpet. Paint. Bench tops. The cosmetic stuff that depreciated in every house.

What holds the value is double glazing, insulation, and build quality – features that don't wear out. 

Townhouses vs houses: What goes up in value faster right now?

Historically, townhouses and standalone houses in New Zealand have increased in value at a similar rate.

Here is a graph showing the average annual capital growth for townhouses and houses: 

Townhouses increase at almost the same rate as houses in Auckland. You can see in the graph how similar the two lines are.

Existing properties go up and down in value roughly the same rate as new ones.

Yes, there is a slight difference in favour of houses.

When you average it out, houses properties beat townhouses by about 0.6% per year (in this example).

That means if existing properties increased 8% per year, townhouses rose around 7.4% per year.

There’s very little in it.

It turns out that having three or four times more land didn't translate into dramatically better capital growth.

But what will happen in the future? We don’t know exactly yet. The future hasn’t happened yet.

Based on the arguments you’ve heard what do you think will happen? Let me know down in the comments section. 

Ed’s view: Do I think townhouses will keep going up in value?

I do think townhouses will keep going up in value over the long term. Not because they're townhouses but because they're becoming the type of home more Kiwis can afford and increasingly want to live in.

Could standalone houses outperform them? Absolutely. History suggests they probably will by a small margin.

But here's the key point: the data doesn't support the idea that townhouses are poor investments simply because they sit on less land.

To me, that's the biggest myth.

If I had to choose between a well-located townhouse and a poorly located standalone house, I'd pick the better location.

Because in the long run, people don't buy square metres of land. They buy a place they want to live.