The poor old townhouse has been much maligned in some quarters and been the focus of debates ranging from quality issues, to tenure and investment driven outcomes rather than liveability. Some suburbs have experienced significant changes to densities whilst others have been left largely unaffected. When one considers that townhouses comprise a relatively small segment of the residential market, it is unfortunate that such a useful form of accommodation has not been more popular and that the architectural merit of many projects has been little more than a printing press of duplicate designs. Good quality townhouse accommodation will continue to be sought after by first home buyers, right sizers and everyone in between. So where did Queensland’s greatest rental growth occur in townhouses?

The table below provides a summary of Queensland’s top three postcodes in terms of rental price growth for three bedroom townhouses between September 2019 and September 2020. Three-bedroom layouts have been selected for inclusion as they accounted for 80% of all new bonds lodged for rental townhouses in the last quarter, whilst two-bedroom layouts comprise much of the balance. As were the cases for house rents, only postcodes that recorded a minimum of 20 new bonds in the September quarter of 2020 were included in the following analysis in order to avoid results that were susceptible to skewness.

The townhouse market is very different to the housing market, with each of the top 3 postcodes being located within South East Queensland and not in regional centres. This is partially by default, with townhouse accommodation being concentrated within higher density locations and potentially being less relevant in some regional locations. Notably, two of the top three postcodes neighbour one another in the southern area of the Gold Coast (4221 & 4220) which has become a focal point for residential and infrastructure development activity in recent years, whilst the 4120 postcode occupies a southern pocket of inner Brisbane.

4221 Postcode

The 4221 postcode has emerged as a development hotspot in recent years, particularly in Palm Beach which has continued to experience a surge in premium, beachside apartment development projects through a growing list of reputable developers including firms like Sunland and Velocity Property Group. The influx of new beachside apartments has given rise to a rapidly emerging café and restaurant culture, whilst Palm Beach also welcomed a new Coles supermarket and retail hub in July 2019 that will benefit from the current $1 Billion Upgrade to the M1 that runs through the middle of the 4221 postcode on its way from Varsity Lakes to Tugun.

Whilst new apartment projects have dominated the headlines in Palm Beach for the past few years, the suburb has also seen some of its original homes redeveloped into duplex and small townhouse projects. A number of smaller scale developers have begun to capitalize on surging land values and increased demand from wealthy buyers, with population densities in the suburb also increasing for the future arrival of the Gold Coast Light Rail project in years to come. Whilst townhouse supply in the 4221 postcode has traditionally been concentrated west of the motorway in the more affordable suburb of Elanora, recent developments in Palm Beach have seen this market edge into higher price points. Accordingly, whilst part of the recent growth in townhouse rental prices can certainly be attributed to gentrification in a suburb that continues to be in hot demand at a staggering current rental vacancy rate of just 0.1%, some of the price growth should also be attributed to the emergence of some new, high-end properties that have increased the ceiling on townhouse rental prices overall.

Palm Beach remains one of the most rapidly gentrifying regions in Queensland, rivalled only by the likes of West End and other parts of South Brisbane. The improvement in urban form that has occurred in the 4221 postcode is now being reflected not only in rental and sales prices, but in the type of buyers and residents it attracts. Palm Beach has rapidly evolved from a location known for socioeconomic challenges with unemployment rates as high as 10% in December 2010, to a suburb that is held in high regard by young professionals and families alike. This region of the Gold Coast is becoming increasingly known as a premium residential market that is supported by an improving unemployment rate of 5.9% (March 2020).

4120 Postcode

The 4120 postcode is located on the southern fringe of Brisbane City and hosts the suburbs of Greenslopes and Stones Corner. The local property market is generally geared towards young professionals, hosting a young median age of just 32 years and with the Health Care, Education and Professional Services industries accounting for circa 40% of local jobs. Located just five kilometres from the CBD (as-the-crow-flies), the 4120 postcode is like many inner ring suburbs of Brisbane where development activity has typically taken shape through the redevelopment or neighboring established house sites into medium rise apartments, whilst townhouse developments have been less common. According to the ABS, the housing market in 4120 postcode comprises 50% apartments, 41% houses and just 9% townhouses making them somewhat of a rarity.

The small size of the local townhouse market has played some part in supporting stability and rental price growth in recent years, with a number of small infill projects having a notable impact on rental rates due to a general lack of comparable supply. It’s important to note that the 12.5% increase in three-bedroom townhouse rents that was recorded in the 4120 postcode between September 2019 and September 2020 was based on just 15 and 20 new bonds lodged in each quarter respectively. There have been a select number of new townhouse projects in the local market of late, which have reportedly been designed to accommodate young professional couples. These times of local renters (or owner occupiers) are less likely to have experienced changes in their employment status due to the 4120 postcodes strong links to the Health Care and Education sectors, which have been less exposed to Covid-19 related downturns in jobs and wages.

The Sierra Group has been active in these suburbs creating high quality townhouse residences that demonstrate what can be achieved when there is a desire to improvement upon “investment grade” design and finishes.

4220 Postcode

The 4220 postcode neighbours the 4221 postcode to the north and includes a number of coastal suburbs that have also been experiencing gentrification in recent years. Burleigh Heads has been a sustained hotspot for development with a number of new, premium apartment projects being built along the esplanade in what has been the first notable wave of new supply for Burleigh Heads since pre-GFC conditions. Despite the challenges that Covid-19 has presented for the hospitality industry, Burleigh Heads continues to be one of the most popular restaurant, café and bar precincts on the Gold Coast. The Burleigh Pavilion has been extremely popular since it opened its doors on the famous Burleigh Headland in late 2018 and has since been joined by a number of other highly acclaimed restaurants such as Rick Shores and Light Years. The rejuvenation of the local hospitality sector has come at a time when early works have begun for Stage 3A of the Gold Coast Light Rail, which is scheduled for completion in 2023 and will extend the existing line from Pacific Fair Shopping Centre to Burleigh Headland with eight stops along the way, including multiple stations in Mermaid Beach, Nobby Beach and Miami.

Whilst forthcoming infrastructure investment has seen apartment projects emerge closest to the coastline and the social hub of Burleigh Headland, other parts of the 4220 postcode have seen a similar trickle effect as observed in the 4221 postcode. The 4220 postcode has also experienced a rise in the number of older houses, particularly west of the Gold Coast Highway, being demolished for duplex or townhouse developments. This has been particularly common in parts of Miami, which continues to be viewed fondly by those who want to be close to the beach and within reach of the social hotspots of both Burleigh Heads and Nobby Beach, but without the same price barrier of entry. Having certainty around the completion of the light rail extension, residents will become more connected to some of the Gold Coast’s most popular social and employment hubs. In the years to come this is expected to have had a measurable impact on demand in suburbs like Miami.

As land continues to become more scarce, particularly in coastal and inner city locations, townhouses will remain a viable and highly desirable housing option. There is an expectation that non-heritage listed houses will make way for better quality townhouses with architectural merit. As in many southern State suburbs, Townhouses are starting to achieve a premium over older housing as the market responds to design and liveability.

Tasman Nealon | Property Economist

Queensland's Top Rental Markets in 2020 : Part 2 Townhouses

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