Do townhouses grow in value faster than houses or units?

Cotality does not publish a townhouse series, so there is no verified figure. Its September 2026 annual changes show houses and units moving differently by city: Sydney houses fell 8.2% against 3.8% for units, while Brisbane units rose 8.5% against 5.3% for houses. Results change month to month and by market.

Can investors still negatively gear a townhouse?

Under current settings, yes. From 1 July 2027 the rules change: new builds keep negative gearing, and established dwellings bought after 12 May 2026 can only deduct losses against residential property income, with excess losses carried forward. Check the final definition of a new build.

What rental yield do townhouses earn?

No published source gives a national townhouse yield. Cotality's gross yields are 3.6% for houses and 4.7% for units nationally, so a townhouse could land anywhere in that range or outside it. Work it out from the actual price and the rent a local agent expects.

Are new townhouses treated differently from older ones for tax?

Yes in two ways. New plant and equipment can generally be depreciated, while most second-hand items in an established rental cannot since 1 July 2017. And the 2026 reforms favour new builds. The capital works deduction on the building can apply to both new and older townhouses, depending on when construction began.

How do vacancy rates affect a townhouse investment?

Every empty week removes a week's rent. Cotality's national vacancy rate was 2.0% in September 2026, up from a record low of 1.5% in February but below the pre-COVID decade average of 3.3%. Adelaide was the tightest capital at 1.4% and Hobart the highest at 3.0%. These are city-level figures, so a property manager can say what applies in a particular suburb.

Are townhouses a good investment?

There is no single answer, because the result for a townhouse depends on the price paid, the rent achieved, the running costs, the finance and the owner's tax position far more than on the word "townhouse". As at 7 October 2026, Cotality's latest report (to 30 September) shows national dwelling values 5.2% below their March 2026 peak and a national gross rental yield of about 3.9%, so any townhouse is being judged in a falling market with modest yields.

Cotality splits homes into "houses" and "units" and does not publish a separate townhouse series. The house and unit figures below are the nearest published guides, not townhouse figures, and the report does not say where townhouses fall.

Checked October 2026. Rules, rates and prices change, so confirm anything that matters with the source linked below.

What the latest market data shows

These figures come from Cotality's Home Value Index for October 2026, which covers results to 30 September 2026.

Values: national dwelling values fell 1.1% in September, the sixth monthly fall in a row. Over 12 months the national change was 0.0%, but Sydney was down 7.0% and Melbourne 6.2% while Perth was up 10.1%, Adelaide 6.5% and Brisbane 5.9%.
Yields: the national gross yield on dwellings was 3.9% (houses 3.6%, units 4.7%). Across the capitals it ranged from 3.4% in Sydney to 6.5% in Darwin.
Vacancy: the national vacancy rate was 2.0% in September, up from a record low of 1.5% in February 2026 and still below the pre-COVID decade average of 3.3%.
Time to sell: capital city homes took a median of 39 days to sell, against 23 days a year earlier, and estimated sales over the three months to September were 19.1% lower than a year earlier.

Cotality also says opportunities for neutral or positive cash flow remain low because of high holding costs, including interest rates, insurance, maintenance and strata fees. That is the main tension for any investor in a townhouse: the rent has to be weighed against the full cost of holding the property.

Browse new townhouses

See the townhouse developments selling now, with bedrooms, prices and completion dates, city by city.

Where a townhouse sits between a house and a unit

A townhouse can be a freehold lot with its own title or a lot in a strata or community scheme with shared property, and the difference changes both the costs and what you own. The strata versus Torrens title guide explains how, and townhouse versus house covers the everyday differences.

Cotality says its index prices attributes such as bedrooms, bathrooms, land area and location. For tax, the building and the land are treated differently: the ATO's capital works deduction is worked out on the construction cost of the building, not on the purchase price, so it does not come from the land.

Costs that cut into the return

Ongoing costs commonly include body corporate or strata levies, council rates, insurance, agent fees, repairs and any time the property is empty. Land tax is a state tax, so whether it applies and how much varies by state. The ATO treats regular administration levies, insurance, council rates, land tax and agent management fees as deductible, while special levies for capital improvements are not deductible straight away. The yield and costs guide works through an example, and the body corporate fees guide covers the levies.

Tax settings that changed in 2026

The ATO says the 2026-27 Budget negative gearing and capital gains tax measures are now law, with a start date of 1 July 2027, and Treasury says the core legislation passed Parliament in June 2026. The Budget explainer from May 2026 sets out how they work:

Negative gearing is limited to new builds from 1 July 2027. Properties held at 7:30pm AEST on 12 May 2026 are exempt from the negative gearing change, and the explainer says contracts entered into but not yet settled at that time also qualify.
The 50% capital gains tax discount is replaced by cost base indexation and a 30% minimum tax rate, applying to gains that accrue after 1 July 2027.
Buyers of new builds can keep negative gearing and choose between the 50% discount and the new arrangements when they sell. Later purchasers of the same dwelling cannot.

The definition of a new build matters for townhouses. The Budget explainer lists a new apartment bought off the plan, any construction on previously vacant land and a duplex built after knocking down one house as eligible, and a free-standing house replacing an older house as not eligible. It does not list a townhouse example. In August 2026 Treasury released exposure drafts for consultation (closed 21 August 2026), and its media release says a property will generally count as new where it adds to housing supply and is acquired within 24 months of a certificate of occupancy, which extends the 12 months in the Budget explainer. That draft was not law at the time of writing, so a tax adviser or the ATO is the place to confirm whether a particular townhouse would qualify.

Depreciation is a separate question, covered in the townhouse depreciation guide.

What to weigh before deciding

The price against recent sales in the same development and suburb.
How many similar townhouses in the same project may be for sale or rent at once.
The title type, the levies and what the strata records show.
The finance cost and how a rise in rates or a fall in values would affect the numbers.
For off-the-plan purchases, the risks of buying off the plan.
The tax position, which a registered tax agent can model from the owner's own figures.

Buyers can browse new townhouses in Melbourne and the other cities to see what is on offer, and ask for price lists.

Common questions

Do townhouses grow in value faster than houses or units?: Cotality does not publish a townhouse series, so there is no verified figure. Its September 2026 annual changes show houses and units moving differently by city: Sydney houses fell 8.2% against 3.8% for units, while Brisbane units rose 8.5% against 5.3% for houses. Results change month to month and by market.
Can investors still negatively gear a townhouse?: Under current settings, yes. From 1 July 2027 the rules change: new builds keep negative gearing, and established dwellings bought after 12 May 2026 can only deduct losses against residential property income, with excess losses carried forward. Check the final definition of a new build.
What rental yield do townhouses earn?: No published source gives a national townhouse yield. Cotality's gross yields are 3.6% for houses and 4.7% for units nationally, so a townhouse could land anywhere in that range or outside it. Work it out from the actual price and the rent a local agent expects.
Are new townhouses treated differently from older ones for tax?: Yes in two ways. New plant and equipment can generally be depreciated, while most second-hand items in an established rental cannot since 1 July 2017. And the 2026 reforms favour new builds. The capital works deduction on the building can apply to both new and older townhouses, depending on when construction began.
How do vacancy rates affect a townhouse investment?: Every empty week removes a week's rent. Cotality's national vacancy rate was 2.0% in September 2026, up from a record low of 1.5% in February but below the pre-COVID decade average of 3.3%. Adelaide was the tightest capital at 1.4% and Hobart the highest at 3.0%. These are city-level figures, so a property manager can say what applies in a particular suburb.

Keep reading

Sources

This is general information, not financial, tax or legal advice. Get advice that suits your situation before you buy.