Terraced housing has undergone a significant transformation, reflecting New Zealand’s changing urban landscape and housing needs. Once associated with dense, working-class neighbourhoods, terraced homes have evolved into a sought-after solution for modern living and their design and layout continues to change to keep up with the demands of many buyers and communities.

According to Bayleys New Build Townhouse Q4 Report 42.5% of all new consented homes are townhouses, and their popularity is set to keep growing.

Chris Farhi, Bayleys Head of Insights and Data says part of that growth includes substantial changes to their design and configurations in recent years.

“When the market was operating at its peak around 2021, we saw a lot of developers focusing on small, affordable townhouses and the market moved towards configurations like one- and two-bedroom options to really target those affordable buyers.”

“We're now seeing the market start to pivot more into larger townhouses with a bigger swing towards three-bedroom, two-bathroom terraced homes, often with higher specs like EV charging capability.”

Farhi says that could be down to a couple of things including providing better opportunities for larger families and more options for buyers to live in a “flatting” scenario which can help with funding approvals.

“The other aspect is down to the fact that many buyers have become a lot more discerning, and with an oversupply of listings there’s a lot more to choose from.”

Farhi says in locations like Queenstown where the prevalence of townhouses is relatively new, the demand for smaller units is still high.

“A good example is Five Mile Villas, where it's primarily a two-bedroom townhouse product. It's been very successful, and the reason is that there hasn't been much of that delivered into the Queenstown market.”

But locations like Auckland that already have a lot of townhouses are ready for the next housing cycle.

“We’re seeing emerging demand for people in smaller townhouses who are looking to stay in the location area but upgrade to a larger home, and that’s creating that opportunity for a further cycle of larger townhouses.”

“The other thing that we're seeing is developers starting to focus on selling down their residual stock from the prior cycle so they can get ready for the next cycle, often with incentives to help attract buyers to those homes.”

WHAT DO THE CHANGES MEAN FOR PRICING?

Farhi says right now construction costs are still high, and even though there have been some indications they’ve pulled back, they haven’t completely settled.

“So, it means that the new supply coming to market isn’t dramatically cheaper.”

According to CoreLogic data the latest median value for Auckland flats and townhouses is around $775,000.

“That still makes terraced homes a much more accessible way to secure a new build in a desirable location that would otherwise be out of that buyer’s budget if they were looking at traditional residential properties in the same area.”

The homes are also low maintenance with modern features like double glazing and efficient heating to reduce operating costs.

ARE THEY A SENSIBLE LONG-TERM INVESTMENT?

With the increase in bigger terraced housing options Farhi says many buyers are considering them more as long-term investments.

So, what are the things you need to consider to ensure you get the most out of your money?

“One of the things that sticks out to me is about putting some focus on the livability of the home. So, if you're investing as an owner-occupier or as an investor, think about those aspects that are going to contribute to livability.”

“This includes things like car parking, what kind of maintenance it needs, and what kind of materials have been used?”

Farhi says more research is starting to help define that livability by looking at how people are living in terraced housing, and what their experiences are.

“These are research papers like studies from Auckland Council that highlight things like ventilation, storage and those sorts of features.”

“I also suspect that all of those features will become the baseline standard as the market becomes more astute over what a good townhouse is.”

“So, if you're looking at a new build at the moment, really think about how those things work, because they can be difficult to retrofit, and there’s often little room for major renovations or changes, particularly if it’s a near new property that might still have warranties in place.”

Farhi says that will translate to better tenants or a more enjoyable living experience overall.

Ultimately terraced housing is here to stay, and as our population grows so will the demand - especially as improvements and size increases make them a viable long-term investment.