The demographics of our cities are changing at a dramatic pace. While most are distracted by the state of the Euro and the possible consequences to the Australian economy, long-term property investors should have their sights set on the emerging trends affecting Australian real estate.
BY CATHERINE CASHMORE
Immigration has brought a wonderful diversity of culture to Australian shores, but the effects on property have been startling. The biggest increases in population between the Australian Bureau of Statistics (ABS) 2001 Census and 2006 Census were from China (64,000) and India (52 000) – two countries with dense populations and lifestyles very different from that of the typical Aussie family. As a proportion of our population, ratios of migrants born in Asian countries are on the rise and it’s suggested that by 2025 they’ll be the majority, not minority.
To give you some idea of current living conditions in these two countries, India’s urban population is growing twice as fast as the rural population and China’s metropolitan areas have mushroomed. Statistics forecast an expected 350 million people to move into China’s major cities by 2030 and there are reports China will need to build 50,000 new high-rise buildings in the overpopulated towns to accommodate the surge. To the incoming migrants landing on Australian shores, our capitals must seem luxuriously capacious and attractive in comparison.
There’s no doubt population growth has had significant impacts on the changing topography of real estate in Australia. During the 1950s the landscape was sculpted with large blocks of land, smaller houses and huge back yards. Since then city borders have been forced outwards under the increasing influx. Once labelled outer suburban areas are now seen as middle and inner ring suburbs, attracting high property prices and strong demand. The trend for inner-city apartment living has increased and been strongly favoured by investors who lean towards low maintenance set and forget acquisitions – investments that are easy to rent and fall under consistent demand from international students and young migrants.
Melbourne arguably heads the population race and Sydney isn’t far behind; even though the ABS recently reported a slowdown in migration, Melbourne’s still on track to comfortably reach upwards of 6.5 million by 2030. As a result leading demographers have stated that Melbourne and Sydney will need to be ‘completely redesigned.’
The Committee for Melbourne’s Beyond 5 Million report highlights the need to plan for the inevitable swelling of our borders and it also takes into account the effects of cultural diversity.
In short, when it comes time to sell the family home you purchase today, the buying market dominating the population could have completely different tastes and preferences from that of the typical Aussie family – so much so that it could affect the future potential of your investment.
Well-weathered property buyers understand residential real estate with good owner-occupier appeal fuels demand and consequently holds the best prospect for positive long-term capital growth. However many make the mistake of purchasing what they consider attractive and don’t take into account future cultural changes – namely the Asian market. For example, to the average Australian buyer, period properties hold an unqualified level of appeal and capital growth tends to outshine other more modern styles. But to many Asian buyers period homes are often seen as old and dated and newer properties grab the upper hand.
Other trends also are also starting to play an important role in the cultural hubs of our cities. For example, properties with the number ‘four’ in the address are considered unlucky and avoided, whereas the number ‘eight’ in an address has the opposite effect and in predominantly Asian populated suburbs, houses listed with an ‘eight’ will attract a higher price based on this alone. Buyers also want properties that fit a compatible feng shui floor plan with various rooms in different quadrants of the house, which isn’t easy to find. Also, homes opposite a t-intersection, close to a cemetery or with a view from the front door straight through to the rear (something that attracts European and Australian buyers) are also frowned upon. It’s worth investors taking these aspects into account because the trends are not only likely to grow in dominance but – depending on location – they may also start to affect the price of your best and most valuable asset.
With lack of experience, investors often get caught up purchasing property with a preconceived set formula and they forget to think about the area they’re purchasing into. For example, if you want to gain from prospective future demand, it’s no good purchasing – or indeed ‘planning’ – a modern ‘box’ style townhouse in a location that predominantly attracts buyers who flock there for the pretty streets lined with Californian bungalows on expansive blocks of land. Neither is it wise to target a small one-bedroom apartment in a popular school zone in an area that only predominantly holds value for families with school age children.
Likewise, a simple look at Australia’s future demographics is giving us clues to what will affect property prices in the future – and it’s not as simple (as some would suggest) of ‘house and land versus apartments’! As individuals we can’t control future market movements, however with a bit of insightful forethought we can minimise the risks of our choices – especially when it comes to purchasing real estate.
Catherine Cashmore is senior buyer advocate and property advisor for Elite Buyer Advocates. With extensive experience in all matters regarding real estate, Elite Buyer Advocates purchase and negotiate over $100 million worth of property each year for their clients. For more information, visit http://www.elitebuyeradvocates.com.au/