As a Brisbane Buyers Agent, I do not recommend investing in Brisbane Townhouses for a number of reasons. They are a cheaper option for many investors and are often promoted by Investment Property Groups or Advisory services as a low-cost investment property option. Before you consider this type of investment option, you need to understand the basics of what drives capital growth and returns in real estate.
Supply and Demand
The primary driver is Supply and Demand and it works like this. If there are 1000 townhouses on the market right now then demand will be very low as there is such a wide range to choose from. If there are another 1000 townhouses currently under construction then demand will be low for the foreseeable future as well. These factors will lead to either very low capita growth or negative capital growth.
The Land Component
In real estate, we teach investors that it is the land component of a property that appreciates in value rather than the dwelling that has been built upon it. With a Townhouse, you are purchasing a strata-titled property which is a way of purchasing a unit or townhouse whilst sharing common grounds (land). Meaning you are buying the dwelling and not the land. This is often a low-cost way of investing in the Brisbane property market but the purpose of any investment is to produce returns. So whilst it may be a low-cost solution to property investing, if that low-cost solution does not grow in value and produce strong returns, then what was the point of the investment in the first place.
If a developer has built or is building a new townhouse complex then that person will be under pressure from the banks to start paying back monies loaned to fund the development. The solution is to invest heavily in marketing that makes the location and investment sound very good and then make their stock available to the investment property advisory services with the promise of high commissions. That is what happens and that is why you often be presented with townhouses as a good investment option.
The Problem We Have
The problem we have in this industry is the motivation behind the sale. Is an agent or advisor promoting a particular property for your long term benefit or theirs? In my early days in this industry, I worked for a number of organizations that provided members of the public with property investment advice. The properties they were promoting were in places I would not invest myself and I began to wonder whether they were there to provide a true service to a client or simply sell any property to anyone in order to make a sale. Sad to say it was the latter, these companies are attracted by the high commissions paid by developers to promote their properties in big estates in order to meet their own financial commitments. And over the years the one common factor I have noticed about these groups is their lack of longevity, they are usually gone after 2 or 3 years.
Other Investment Options
Whilst townhouses are seen to be a low-cost alternative to purchasing an investment property, you might be surprised that you can purchase a very good brick and tile home on 600m2 of land within 30 kilometers of the Brisbane CBD. Choosing the right suburb here is very important as some suburbs are cheap and will stay that way for a while to come, but Brisbane has a number of very low-cost suburbs that are in between the Brisbane CBD and the Gold Coast. These locations are very attractive to anyone who needs access to the city as well as fast access to the Gold Coast.
If you are being presented with a townhouse or even a unit as an investment option, do a bit of simple due diligence. The first thing to do is visit a real estate portal like Domain or Real Estate.com and do a search for townhouses for sale right now. Then do the same in the rental section, see how many townhouses are available to rent and you have now been able to make a very quick determination. about the market you are about to invest in.
Just don’t do it, either call me Alistair Kelsall on 0405 131 333, and I will provide you with much better alternatives or invest in shares. Don’t just purchase a property for the sake of being a property investor.