API Blog :: Have your say!

April 29, 2011

Our changing lifestyle holds the key to successful property investment


This may seem obvious, but I have to start with it – in order to create long term wealth from property it’ll be important to know the type of property that will be in continuous strong demand from both owner occupiers and tenants in the future.

BY MICHAEL YARDNEY

Understanding the needs of your market is fundamental to success when it comes to securing properties that will attract above average capital growth in the years ahead and one of the keys to this is to study demographics – that is the number and composition of our population and how we choose to live in our society.

Interestingly, Australian demographics are undergoing some radical changes at present.

With housing affordability becoming an increasing issue for many younger first homebuyers and our lifestyle becoming a lot more hectic, we’re seeing an increase in the popularity of medium density apartment living.

This is vastly different from the way older generations chose to live, with many having opted for a detached house on a large suburban block of land.

The fact is that the property investor of the future will be catering for a whole new breed of tenant and buyer.

Gen Y is on the move, as many from this 15 to 24 age group start to think about leaving the family home and starting their own life independent of mum and dad. In 2010, around 150,000 new households were created in Australia and approximately 65,000 of these comprised Gen Y singles, groups and couples.

Interestingly the majority of this younger demographic will be destined to live as tenants for quite some time, stuck on the rental roundabout due to ever increasing house prices and the cost of living, interest rate uncertainty and of course, annually rising rents.

As such, many choose to live in shared accommodation and multi-income households in order to reside in the locations they favour, but could never be able to afford as a homebuyer. These include inner ring suburbs close to our major CBD’s where employment opportunities and a fast paced lifestyle with plenty of recreation and entertainment facilities are the primary attractions.

With the number of Gen Y’s looking for accommodation continuing to rise, rental demand for near city and inner suburban units and apartments will grow significantly in the coming years.

And our old friend the supply and demand equation will ensure that rents for these types of properties keeps rising, as will their values as higher yields will entice investors back into the market.

Today medium density properties – apartments and townhouses – make great investments and in general appreciate in value equally, if not more, than houses in our capital cities.

This is of course due in part to affordability, as units offer a much more affordable alternative housing option than houses. But it’s about much more than affordability.

Significant changes in our population profile and lifestyle priorities are creating a strong demand for apartment living. Today, our lifestyles are vastly different to those of our parents. We’re working longer, we’re increasingly time poor and we’re starting families much later in life. This means proximity to work, transport, entertainment, cafes, shops and beaches is becoming more important than owning a piece of land.

In Australia’s capital cities, apartments are continuing to improve in design and size and are generally closer to the CBD than affordable houses. Of course there’s still demand for houses with a front and back yard, particularly from families with more than one child, yet there’s definitely a shift towards apartment living.

It should be fairly obvious that more single households, smaller families and the impact of the baby boomers downsizing will continue this trend in the long term.

People are getting married later in life and apartments suit their busy lifestyles, and when a baby comes along, they’ll often stay in their apartment or buy a bigger one in the same location.

And don’t forget as baby boomers move into retirement they’ll also significantly increase the demand for townhouse and apartment living. Low maintenance, secure ‘lock and leave’ living is a priority for these buyers.

According to a report last year from RP Data, capital city units and apartments only accounted for 25 per cent of all home sales fifteen years ago. Today though, medium and high density accommodation makes up around 35 per cent of all home sales.

Now that’s an interesting trend, isn’t it?

In our two most densely populated capital cities, RP Data found the proportion of unit sales is significantly larger. For the month of August 2010, Sydney and Melbourne unit sales were at 43 per cent and 37 per cent of all dwelling sales respectively.

So if you’re looking for a great investment property you should seriously consider well positioned, established apartments in smaller boutique blocks with value add potential through renovations. Look for a property with a ‘twist’ – something special or an element of scarcity.

Then hold it as a long-term investment and reap the rewards.

Do you think it’s better to buy houses or apartments? Tell us if you prefer to buy a particular property type.

Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.

Bookmark and Share

7 Comments

  1. I think you are spot on with this article Michael. I hope you haven’t given me to much competition, because this will be my focus over the next 12 months. Cheers

    Comment by Michael — April 29, 2011 @ 2:48 pm

  2. I am buying Victorian terraces within 5 kms of Sydney CBD, for scarcity, quality & land value. Problem is land tax.

    Comment by Marie — April 30, 2011 @ 7:20 pm

  3. Great post Michael. hmm…I don’t think it’s better to buy either houses or apartments. I go for a mix of both. I’ve had houses in the past but also have apartments in the heart of Brisbane. Both have their advantages and disadvantages.
    All up, another great post.

    Comment by Anonymous — May 1, 2011 @ 8:12 pm

  4. Great article about residential investments. I think the decision between apartments or, houses is also location dependant and what the tenant target market in the area demand.

    Comment by Roger Perrett — May 10, 2011 @ 4:46 pm

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Subscribe to API eNewsletter