Houses vs. Townhouses vs. Apartments. Which Goes Up In Value Faster?

LM b W

Laine Moger

Journalist and Property Educator for 6 Years
Introduction

What Goes Up In Value Quicker – Houses, Townhouses or Apartments?

Traditional thinking in property investment ties increases in property values to increases in the value of the land.

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

By this measure houses should easily outstrip their townhouse and apartment opponents.

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.

Results

Give It To Me Straight, What Are The Results?

Now, if all three property types were in a race, coming in third would be apartments. This type of property consistently achieved the lowest capital growth.

Houses are the winners, 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%.
Houses vs townhouses vs Apartments
Apartments v.s. Townhouses and Houses

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.

We’ll still compare townhouses and houses in a moment, but let’s first consider apartments.

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

Take a look at this graph for yourself. The red line shows the average annual capital growth of townhouses and houses over a 10-year period. The blue line shows the same data for apartments.

Houses vs townhouses vs Apartments Auckland

In essence, 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 had higher long-term capital growth 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 that of 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 was not a long-term trend and over time the value of townhouses and houses outgrew apartments most of the time.

Houses vs townhouses vs Apartments Wellington
Houses Vs Townhouses

Houses Vs Townhouses

It is commonly believed that townhouses sit in second place, or the middle ground, between houses and apartments. Therefore, according to the belief, capital gains should reflect this … i.e. houses should get more capital growth than townhouses.

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

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 are looking for real slam-dunk trends. If we see an undeniable trend, we can have confidence in our findings.

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

Here are the telling graphs. Spoiler alert: The race is very, very close.

Houses vs townhouses vs Apartments Auckland

The red line shows the long-term capital growth rate for houses, and the 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.

Houses vs townhouses vs Apartments wellington

In Wellington, the graph shows there were actually some 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%.

Houses vs townhouses vs Apartments nz

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.

Best Investment Choice

So, What Is The Best Investment For Me?

While it is fair to say that houses generally increase faster than townhouses, the margin is smaller than many investors might think.

Our data shows townhouses are nipping at the heels of standalone houses. And both of these property types are well ahead of apartments.

Because townhouses and houses are so close when it comes to capital growth, you may want to add other factors into the mix when deciding what to purchase.

Townhouse Christchurch nz

By this we mean stir in data about the yield, location and affordability of the property you are looking to purchase.

For instance, if you’re thinking: “I have to buy a house because it increases in value faster”, consider the following example.

Let’s say you have a budget of $800,000. For that money you can either:

  • purchase a house on the outskirts of Auckland, or
  • a townhouses closer to the centre of the city.

What’s going to grow in value faster?

Well, houses tend to grow in value slightly faster than townhouses. But properties at the centre of the city tend to grow in value faster than those on the outskirts.

The decision 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.

Houses vs townhouses vs Apartments Opes
Conclusion

Final thoughts...

There is no competition when it comes to apartments. They just don't increase in value as fast as their two competitors (sorry apartments).

Yes, houses still wear the gold medal, but only just. Townhouses have one foot on that podium too, they aren’t that far away.

For investors wondering what they should go with – the answer may not be as simple as: “Just buy a house”.

Start stretching your considerations to consider what might be the better overall investment for you, when you factor in yield, location and affordability.

Additionally, if you want to learn more then check out our podcast below!

 
Who are Opes Partners?

Who are Opes Partners and can they help me?

What is the 3-Step Opes Coaching Programme?

1. Plan out your property investment portfolio

The first step in the programme is to co-create a plan using our MyWealth Plan software. We built this software specifically to help Kiwis create a financial plan in under an hour.

You'll leave this 1-hour session with a written down plan. Pen to paper.

2. Pick properties that fit with your plan

Once you've created your plan in step #1 – your property partner will go out and find properties that fit your plan. They'll search through projects from up to 58 developers to find the best ones for you.

When you meet again, you'll review the top picks, go through the analysis, crunch the numbers together, and then decide which ones to hold with the developer.

3. Dig into the details – Confirm it's the right property for you

Once you've selected a property, you'll work for 10 days to make sure it's the right property for you. So you'll work with your Property Partner and Client Relationship Manager to dig into the details of the property.

You'll go and look at the development and be introduced to mortgage brokers, solicitors, accountants, and property managers. Their sole job is to help you figure out if this property works for you.

And you’ll have access to all the resources, tools, and data … so when confirmation day comes, you have confidence you know you’re making the right decision.

Who is the Opes Coaching Progamme the right fit for?

  • You understand the concept of property investment, but who wants help putting it into practice.
  • You want a “Done for you” property investment service, so you can be a hands-off investor.
  • You are someone who has at least a 10 year investment time horizon.
  • And finally, you’re ready to become a property investor.

Who is the Opes Coaching Progamme is NOT the right fit for?

  • You’re more into the smell of paint or the colour of a wall than the numbers that stand behind an investment property.
  • You only want investments that are hands-on, so you can save a few dollars here and there.
  • You have plenty of time on your hands and want to do the property investment process yourselves.
  • You’re looking for an overnight success and want to get rich quickly.

What does it cost to work with Opes Partners and go through the programme?

It’s free. Complimentary. No Cost.

Why?

The developer pays us a marketing fee when you confirm that the property is the right fit for you. Very similar to the way a mortgage broker gets paid by the bank.

Now it's important to note that we are paid the same fixed rate no matter what property you invest in.

If it’s a $500k apartment in Christchurch or a $1.3 mil 3-bedroom townhouse in Ponsonby – we get paid the same rate.

That's important because then we can recommend the right property for you, and there's no incentive to recommend you invest in a more expensive property, just so we get paid more.

I want learn more about how Opes can help me

Learn more about the Opes Coaching Programme Here

LM b W

Laine Moger

Laine Moger has been a journalist and reporter for the last 6 years. She previously worked for Stuff, The North Shore Times and Radio NZ. She has a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism.