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Many property investors think that houses increase in value faster than townhouses or apartments.

The idea is: more land = faster house price increases.

But is this traditional way of thinking accurate? To find out, we here at Opes looked at the data to answer two questions:

  • If so, is the difference in capital growth meaningful enough to pay attention to?

‘Not always’ is the answer to both questions, according to data released by the Real Estate Institute of New Zealand (REINZ).

In this article, we pit houses, townhouses and apartments against each other to see who comes out on top in terms of capital gains.

You’ll also learn the pros and cons of each property type, and learn the answers to the most common questions investors have when it comes to purchasing the different alternatives.

Do you have a question or comment about townhouses vs houses vs apartments? Feel free to leave your thoughts in the comment section at the end of the page.

Houses vs. Townhouses vs. Apartments. Which one goes up in value faster?

If all three property types were in a race, apartments would come third. This type of property consistently achieved the lowest capital growth.

Houses would come in first place. But it’s a photo-finish. Houses only beat townhouses (in terms of capital growth at least) by a nose.

Take a look:

  • In Wellington, houses beat townhouses 58% of the time, and only by a 0.1% margin, on average. As an example, if a house increased by 5% in a year, the equivalent townhouses increased 4.9%.
  • In Christchurch, houses beat townhouses 71% of the time, but by a 0.5% margin.
  • In Auckland, houses clearly won, beating townhouses 96% of the time, but only by 0.6%.

Apartments v.s. Townhouses and Houses

During our first investigation we clumped houses and townhouses together and compared them to apartments.

Why? Well in order to make clear conclusions we want to use high quality data. The highest quality data we could get – the REINZ house price index – only splits out apartments vs non-apartments.

apartments vs house and townhouses

We’ll still compare townhouses and houses in a moment, but let’s first consider apartments vs the other two options.

Straight off the bat, we can see that apartments achieved significantly less capital growth over the long term.

Take a look at this graph, which shows the data for Auckland City. The dark blue line shows the average annual capital growth of townhouses and houses (averaged over the prior 10-years). The light blue line shows the same data for apartments.

This shows the long-term capital growth rate between the two types of properties.

The key takeout is that between 1992 and 2021, townhouses and houses doubled in value more quickly than apartments … in every single period we looked at.

Short answer: Apartments get less capital growth than townhouses or houses.

Is it the same in Wellington city?

Wellington City also has a lot of apartments. The data tells a similar – but slightly different – story than in Auckland.

In the early days of the 2000s, our data showed that long-term capital growth rate for apartments was higher than that of houses or townhouses.

But that trend didn’t last. The value of townhouses and houses increased more quickly than apartments most of the time.

Houses vs townhouses – What goes up in value faster?

In property investment circles, many people think that townhouses sit in second place when it comes to capital growth.

The middle ground, between houses and apartments.

In that case houses should get more capital growth than townhouses. But do they really?

Before we go into more detail, we have to point out that for this data set we weren’t able to use the REINZ house price index (the highest quality data).

Instead, we had to look at the median sales data. This is a lesser quality data set, but the best we have.

Don’t lose heart, it’s still good but means we need to look for big slam-dunk trends to have confidence in the conclusions.

If we see an undeniable trend, that’s when we can have confidence in the findings.

So, what did we do? We rinsed the data and looked at our three larger cities: Auckland, Wellington and Christchurch.

Here are the most telling graphs, starting with the Auckland Region.

The light blue line shows the long-term capital growth rate for houses, and the dark blue line the long-term growth rate for townhouses.

What’s surprising is how close the lines are, which suggests the difference in long-term capital growth is not very large.

In Auckland, the graph shows there is some difference between houses and townhouses. Yes, generally speaking, houses are gaining more - but not by much.

Houses had a higher long-term capital growth rate 96% of the time, but only with a 0.6% margin. That means if houses received a capital growth rate of 7%, townhouses grew by 6.4% in that given year.

In Wellington, the graph shows there were many more periods where townhouses increased in value faster than houses.

Houses beat townhouses 58% of the time, and townhouses beat houses 42% of the time.

The overall margin is extremely slight at just 0.1%. This means, if a house increased by 5% in a year, the equivalent townhouse increased 4.9%.

In Christchurch, the graph shows similar results to Wellington. There were periods where houses increased in value faster than townhouses. But more recently that gap has narrowed.

On average now, houses beat townhouses 71% of the time, but only by a 0.5% margin.

Do Townhouses Take Longer To Sell Than Houses?⎜Ep. 1600⎜Property Academy

Common investor questions…

Because we work with over 1,000 investors a year here at Opes Partners, we get to hear the questions going through many Kiwi investors' minds.

Here are some of the most common questions we get in relation to houses vs townhouses vs apartments.

Question #1 – “I could buy a townhouse for $1 million dollars and get $700 in rent, or I just sold a house in Avondale for $1.2 million with more land, which got $820 in rent … Why don’t I spend an extra $200k for a house?”

A house may be the right option for you. But based on these numbers, the townhouse appears to be the better option.

The reason is that you need to think about the marginal yield.

This is the extra rental income you receive based on the money you spend on a property.

The investor mentioned above was considering a $1 million townhouse in Auckland that was due to rent for $770 a week. This is a 3.9% gross yield.

They asked whether they should buy an equivalent house that has a garage and more land for $1.2 million. The rental assessment on this property was $830 a week. A 3.6% gross yield.

The investor was wondering why they wouldn’t spend an extra $200k for the garage and land, since the gross yields in their mind were not dissimilar.

The important question investors need to ask when considering an investment is “what is the yield on my marginal spend?”

Sure, there is a 0.3% difference in the gross yields between the two properties. But what do you as an investor get for the additional $200k spent?

In this case, the answer is $60 a week in rent. This is $3,120 a year.

If you spend an extra $200k and get $3.12k back a year, what’s the gross yield on the extra money you spent?

Just 1.56%. Is this a good use of money? Probably not.

You could take that money and use it as part of the purchase of another townhouse and get a 4% gross return.

The important point here is looking at the marginal yield on your additional spend. That’s the logical argument.

Question #2 – “Do townhouses and apartments have as good a resale value as a standalone property?”

Ultimately there are lots of reasons people question why an apartment or a townhouse will (or won’t) have the same resale value as other types of properties.

Resale value effectively means the same thing as capital growth.

So, if townhouses didn’t as a s good ‘resale value’ we’d see them falling behind in terms of capital growth.

We see that a little bit over time. But the differences are marginal.

What we do see consistently is that apartments don’t have as good resale value compared to standalone houses and townhouses.

Question #3 – “Do townhouses and apartments take longer to sell than a standalone property?”

The next most common question is whether townhouses and apartments take longer to sell compared to houses.

This is where we need to look at the average number of days taken to sell a particular type of property.

The data shows us, it does not take significantly longer to sell a townhouse. But it often does take longer to sell an apartment.

Here’s the data for Auckland.

Turning to Christchurch. There isn’t a lot of apartments in Christchurch, so it’s hard to get good data on how long it takes to sell one.

However, there is enough data to draw conclusions about how townhouses and houses compare in the Garden City.

While there have been times where townhouses took longer to sell than houses, over the last 12 years they’ve been about the same.

Today, townhouses are actually selling more quickly.

Right now, it takes 29 days to sell a townhouse (on average), and 31 days to sell a house.

What’s going to grow in value faster?

Houses tend to grow in value slightly faster than townhouses. And both increase in value significantly faster than apartments.

But the decision about what you should invest in is not always cut and dried.

That’s where an investor might start considering yield and the ability to get a tenant. Townhouses tend to get better yields, and properties closer to employment opportunities are in higher demand from tenants.

Ultimately, you’ll need to look at the data, the properties and the numbers and make a decision. That’s where investing gets fun.

Write your questions or thoughts in the comments section below.

Opes Partners
Laine 3 001

Laine Moger

Journalist and Property Educator with six years of experience, holds a Bachelor of Communication (Honours) from Massey University.

Laine Moger, a seasoned Journalist and Property Educator with six years of experience, holds a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism. She has been an integral part of the Opes team for two years, crafting content for our website, newsletter, and external columns, as well as contributing to Informed Investor and NZ Property Investor.

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