Townhouses are in high demand and short supply, which is opening up new possibilities for developers and investors.
For many, the thought of housing that isn’t a freestanding home conjures images of cramped apartments or sacrificing beloved outdoor space. But what if there was a housing solution that offered the best of both worlds – less maintenance, more community, and a perfect fit for a crucial demographic? Enter the townhouse.
Townhouses offer a strategic solution that serves both the needs of individuals and the broader community, extending well beyond their role as a basic housing type.
A win-win for the ‘missing middle’ and downsizers alike
Townhouses are increasingly recognised as a key response to two major housing challenges: bridging the ‘missing middle’ in housing supply and catering to the rising demand from downsizers.
These versatile homes strike a balance between affordability, space, and convenience, making them an attractive choice for a wide range of buyers while addressing broader urban planning needs.
The ‘missing middle’ refers to a critical gap in housing options – homes that fall between large single-family houses and high-density apartment buildings. Townhouses bridge this gap by offering medium-density housing that makes better use of land while supporting walkable communities and sustainable growth.
But despite their potential, medium-density housing remains in short supply in Western Australia. Zoning policies and development trends in WA have historically favoured low-density suburban expansion, leaving a void for those who desire something in between the traditional large block and an inner-city apartment.
ABS dwelling approval data for WA over the 10 years to April 2025 shows detached houses comprised 79 per cent of all new dwelling approvals, with apartments accounting for 13 per cent and semi-detached/townhouses making up 7 per cent.
The Urban Development Institute of Australia’s WA division has estimated those approval levels for new townhouses, villas and terraces is only around one third of required demand.
The ‘just right’ solution for modern living
For downsizers, townhouses offer a ‘Goldilocks’ solution – not too big, not too small, but just right. They provide ample space without the overwhelming maintenance of a detached house, giving residents more time for hobbies, travel, or simply enjoying life.
Shared services like strata management handle exterior maintenance, while residents maintain the privacy of their own front door and often a small patio or yard. Many newer designs also include ageing in place features, such as ground floor master bedrooms or the option for lifts, making them a sustainable long-term choice.
Beyond downsizers, townhouses are also attracting young professionals and small families seeking affordable access to desirable suburbs. By offering a middle ground between the high price of freestanding homes and the limited space of apartments, they allow buyers to enjoy proximity to amenities, schools, and transport links without compromising on lifestyle.
Townhouses are also a win for the wider community. Their compact, vertical design makes efficient use of land, reduces urban sprawl, and supports environmentally conscious living. As demand continues to grow, townhouses are proving to be an essential piece of the puzzle for creating more sustainable, affordable and community-rich environments.
High demand and low supply provide opportunities for investors
Perth’s property market remains a hot topic, with strong growth and tight supply dominating headlines. While detached homes often steal the spotlight, there’s a quieter, yet equally compelling, story unfolding:?the rise of the Perth townhouse as a potential lucrative investment opportunity.
Medium density housing such as townhouses is in persistently short supply across Perth. Unlike some capital cities, Perth buyers have historically favoured sprawling quarter-acre block homes, leaving a significant gap in the market for buyers seeking something in between. The scarcity of townhouse product translates to fierce competition for existing stock, with well-located townhouses often receiving multiple offers, driving up both prices and rental yields.
For investors, this imbalance of supply and demand can present a strong opportunity. Townhouses offer a unique blend of affordability, desirable locations, and the potential for solid financial returns, making them an attractive addition to any property portfolio.
Why townhouses could be a smart investment
The combination of high demand and constrained supply has the potential to support favourable conditions for investors. Townhouses stand out in Perth’s robust property market for several reasons:
- Robust rental market:? With rental vacancy rates at historic lows, townhouses command premium rents due to their convenience, location, and appeal to a wide range of tenants.
- Capital growth drivers:?The underlying land value in well-located suburbs, coupled with the increasing demand for medium-density housing, positions townhouses for excellent capital growth.
- Portfolio diversification: Townhouses can provide a different risk profile compared to other investments such detached homes or apartments, blending the benefits of land ownership with the convenience of strata living.
An attractive development option
Townhouses can benefit investors while also providing a compelling proposition for developers, according to Damian Collins, Chairman of Westbridge Funds Management.
“Focusing on smaller scale, ‘boutique’ developments can be a more feasible and attractive option for developers particularly when it comes to profit potential,” Damian said.
The upshot is that townhouses in high-demand locations have the potential to deliver strong profits to investors in the current market.
“We know from the sheer scale of demand that a quality townhouse product can command a strong price, which further underpins profit potential,” Damian added.
Westbridge is delivering opportunities
Westbridge has long recognised the opportunities presented by Perth’s undersupplied townhouse market.
By identifying suitable infill sites and navigating the complexities of planning and construction, Westbridge is helping address the missing middle with several exciting townhouse projects currently underway or nearing completion across our residential portfolio.
For example, the luxury Applecross townhouse development at 13 Macrae Road are now completed and are now for sale here.
North of the river, Westbridge is in construction phase of 2 Philip Road Dalkeith, which is on track for completion at the end of the year.
These projects follow the successful townhouse developments on Gallop Road and Adelma Road, Dalkeith.
“Our agile business model allows us to adapt to market conditions and seize opportunities for investors when the right location becomes available,” Damian said.
“This is a chance for investors to harness the attractive returns of the townhouse market – where demand far exceeds supply.”
To learn more about our townhouses that are now for sale in Applecross, you can contact us on 08 9321 5566 or email us at [email protected]