Townhouses are the en vogue developments, but come with a substantial price premium: Enzo Raimondo

We all know Melbourne has experienced an increase in apartment and townhouse developments over the past few years. It is hard not to notice these new developments under construction - especially in the inner suburbs. The result of this increasing trend is that for a growing number of suburbs, the majority of dwellings are no longer houses.

Footscray is an example of such a suburb. According to the 2006 Census, around 53% of homes in the suburb were houses. By the 2011 Census, only 47% were houses, with the majority of homes now in the form of townhouses and apartments.

This increase in medium and high rise dwellings provides home buyers with greater options. Home buyers can now select either a house or a unit; they can also choose between a townhouse and an apartment.

Obviously, the main difference is one of size. Townhouses generally have larger living areas than apartments and many feature a backyard or courtyard space. This difference in size is also reflected in the price.

REIV analysis of sales in June quarter 2013 reveals that townhouses can have a substantial price premium over an apartment. This price premium is highest in the inner suburbs. The median price of a townhouse in the inner suburbs was $640,000 in June quarter 2013. This is 35% higher than the median price of an apartment at $472,500. This price premium falls to 15% in the middle suburbs and two% in the outer suburbs.

Choosing between a townhouse and apartment can be the starting point for many home buyers looking in the inner suburbs. To find out more, visit www.reiv.com.au

Enzo Raimondo is CEO of the Real Estate Institute of Victoria.