Premium Profits From Affordable Housing
Premium Profits From Affordable Housing
Affordable housing is topical across Australia. We face a daunting task of ensuring there is sufficient, safe, affordable and secure housing. More than ever, a variety of demographic groups are unable to access or afford appropriate housing either at all or in their preferred location.
Not only is this form of accommodation essential for the community, it also represents a terrific holistic investment for property investors.
The current housing market is tailored for larger property developers, producing four-bedroom, two-bathroom houses. Houses are being built as big as land area and planning laws allow.
The average house in Australia is over 250 m2. Put into context, it is possible to fit 22.6 Hong Kong houses into a single average Australian house. Theoretically, it would be possible to fit 56.5 people from Hong Kong in one Australian house!
At the same time, our average household sizes are decreasing. In 1960 our homes were 85m2 for 3.8 people, in 2011 it was 210m2 for 2.9 people and now we build the largest houses in the world at 246m2 with just over 2.5 in each household, resulting in over 12 million empty, unused or underutilised bedrooms across Australia. Yet we have a housing shortage!
The University of California’s four-year study followed 32 families around their house. The spaces mainly used were the entrance, dining room, kitchen, bedroom, family room and part of the bathroom. All of those extra living areas were simply not used.
If you build or buy 4 bedroom, 2 bathroom houses like the ‘run-of-the-mill’ investor, you are operating on the same level as everyone else, supplying a product that is so useless in the market.
As an example, in just one Australian State there are 3,700 people on a housing waiting list. 60% are couples and 20% singles. 80% of the waiting list require a studio or one bedroom style of accommodation but the makeup of the housing stock available (80% of the accommodation) is 3,4 and 5 bedroom housing!
However, if you design something that works well, is functional and has the ability to transform itself with the number of rooms it provides, you are now appealing to this largely unmet segment of the market.
By you, the investor, implementing an intelligent design, better-utilising space, and enabling multiple people (or family units) to share a dwelling, you can unlock very exciting possibilities for multiple types of residents. These properties are more accessible and affordable; they bring a sense of community and security.
Around the country, State and Local Governments are offering incentives for you to provide this style of accommodation. They know they need to provide funding to move forward and offer financial incentives for people to make money, as well as providing product for the market.
In reality, we are talking about smaller homes and micro-apartments that have access to grass and outdoor space. People don’t want to live in units. They want to have their own outside area and a balcony just doesn't cut it!
People want their own space and their own bathroom. By providing a bathroom to a room, you are able to increase the rent by an average of $20-$30 per room. 4 bedrooms and you can add another $120 to your income, making a positive impression on cash flow.
More income means you can go and create another property. Whether you are a ‘mum and dad investor’, a full-time seasoned investor, or somewhere in between, the opportunity is there for you to fill a hole in the market.
How to make it possible
The demand for this style of property is from people who don’t want, or can’t afford, to spend $795 a week to rent a whole house. They are much happier having their own smaller, self-contained area requiring no maintenance, for half the cost and often with their utilities included.
The broad range of demographics included in our market are professionally employed people, i.e construction workers, doctors and nurses, the middle age tenant, those that by 2026 include 1/3 of people over 70 living on $399 or less, and, for our biggest growing statistic of homelessness being 55+ year old women.
All the research and our own projects show the definite need for accommodation like boarding houses, rooming houses; buildings with areas of self-contained compartments that also share some communal spaces.
The outcomes show that the cash flow is great, the capital growth is fabulous and manufactured growth is amazing. The icing on the cake is the win-win solutions for the investor (positive cashflow whilst supporting those in need), the tenant (having appropriate and affordable accommodation), and the Government (reduced pressure to provide the solution alone).