Amenities may have been touted to drive capital growth in a particular area, but not all amenities will lift values.
So, which ones should you be focusing on when doing your research?
You’ve been told that amenities are an important consideration when deciding where to invest in property.
That is, you should target areas with desirable amenities if you’re after solid long-term growth.
However, the presence of an amenity is not enough to indicate future growth in the area.
You also need to look at other factors.
What to look for when researching amenities in the area
- Signs of oversupply
It’s not hard for a market with all the right amenities to be swamped with an oversupply from developers.
Units in particular can pop up in large numbers on small sites, dramatically changing the supply side of the equation.
“The solution is to buy into property types that can’t be easily replicated in the same space,” says Jeremy Sheppard, creator of DSRdata.com.au.
“The ideal, of course, is an old period house on a large block nestled among other blocks already with houses on them.”
Units carry the most risk in terms of potential for oversupply according to Sheppard.
“A single house can be knocked down and replaced with many units.
There are plenty of blocks in almost every suburb of Australia that have this potential,” he says.
“This is not to say that units can’t be a good investment.
But they’re more of a short-term investment – if there is nothing similar in the development pipeline.
Long term there could be over-supply issues or even changes in council zoning.”
Therefore, if you’re looking for above-average long-term growth, Sheppard says you should target big, unique dwellings as close to the CBD of a capital city as possible.
This gives you the greatest chance for proximity to amenities and the least chance of over-supply ruining it all.
- Age of the amenity
When a suburb receives the injection of an amenity, like a train station, there is a sudden surge in price growth as buyers and tenants recognise the convenience.
However, as time goes on and prices have risen, the benefit of that new amenity has been factored into the prices and the growth rate slows down to normal.
“Amenity age is an important consideration for future growth prospects,” says Sheppard.
“Ideally, you want to see an established suburb close to the CBD receive a couple of new key amenities or perhaps simply an improvement in existing ones.
Many investors place too much emphasis on amenities as being drivers of growth, when much of their driving of growth has already been played out.”
- Range of amenities
While the type of amenities is important, Microburbs.com.au founder Luke Metcalfe says it’s the variety of them that’s a more reliable predictor of demand.
“More important than individual kinds of amenities is the range of them,” says Metcalfe.
“Investors often look at whether there are schools, shops, buses or a train station in the suburb. A better way to do your research is to check how many there are in the area.
Having many options creates competition and vibe and drives growth.”
- Proximity of the amenities
It’s also important to factor in how close these amenities are to your property.
Having amenities that many people use regularly within driving distance is almost always a good thing.
Metcalfe points out that you need about 100 shops within 5km to get into the high growth range.
According to data compiled by Microburbs.com.au, areas with 126-175 amenities located within 5km more than doubled the growth of the areas with just 25 amenities at most.
|Shops within 5km||Capital Growth Rate 2014-15 to 2015-16|
Which amenities are proven to drive capital growth?
When it comes to amenities, the following categories have been proven to correlate with capital growth in an area:
- Transport links like bus and tram stops, train stations, airports, motorways, ferries, bridges, tunnels, etc.
- Education facilities like schools and universities
- Shops such as supermarkets or any other provider of basic necessities
- Lifestyle or recreation centres such as beaches, cafés, nature reserves, clubs, sporting facilities, bars, restaurants, etc.
- Medical centres and hospitals
For families, proximity to good schools is a top priority.
The kids may make their own way to school or may need to be dropped off.
But again, this is a five days a week event so it’s also very important in Sheppard’s view.
Shopping centres probably come in after schools, especially for families.
“Many people will have a big grocery shop once a week but pick up a few extra supplies or forgotten items during the week too,” he says.
Lifestyle is an interesting drawcard for an area.
Some people like to be defined by the lifestyle area they’ve chosen.
“A person’s identity carries a lot of weight in their choice of location.
Although some of us may rarely take advantage of a public pool, nature reserve or restaurant, we may rate the time spent there very highly,” says Sheppard.
Essential amenities: What buyers and renters want
This is easily the most important amenity for most people because it can take them to work and to all the other amenities, according to Sheppard.
“The more frequently people use an amenity, the more important that amenity is.
We usually travel to work five out of the seven days in a week.
So you could say that the transport node that gets us to work is highly important and desired.”
Proximity to water
Even people who aren’t into water sports are drawn to bodies of water, especially beaches.
But even smaller bodies of water such as lakes and rivers have high appeal to both buyers and renters alike due to their recreational aspects.
People visit supermarkets more frequently than any other shops. An area with a supermarket nearby would be more in demand compared to the one without.
It’s a simple little shop, but it triggers strong pick-me-ups. Coffee shops are a sign that the area is gentrifying and there’s economic vibrancy in the area.
A great many people are on medication permanently – not just when they’re sick.
A set of shops with a pharmacy is worth more than one without.
Young families may not be the dominant demographic, but they have the power to drive prices higher.
They’re also targeting family homes.
If this is the case, you need to look into areas that are offering childcare, education and family-related amenities.
Not all of us are gym junkies, but there are many people who have membership to a gym and visit it at least once a week.
In fact, some suburbs define themselves as having a “gym culture”.
In this case, having a gym nearby is a strong draw to this particular demographic.
The most underrated amenities are likely to depend a lot on a particular demographic that wish to live in the area.
If it is young families for example, then childcare centres and primary schools will undoubtedly be big drivers.
But for singles and couples with no kids, entertainment and restaurants will be bigger tickets.
Be sure your target property appeals to a demographic that would most likely fit the amenities of the area.
Although you only visit hospitals when you are sick, having one nearby builds a pool of tenants and boosts economic activity in the area.
Access to parks
While small pockets of parks and playgrounds don’t have the same impact as a major reserve, having access to them is important to families especially in high density areas with limited yards.
Proximity to work is paramount, so having a business centre in your suburb might make walking to work a possibility.
Golf courses add to the beauty of an area as well as improve the recreational appeal.
Parking is essential to high-density areas, especially near shopping centres and public transport links.
These amenities may not necessarily drive value up in an area simply because they’re not highly desired and not frequently visited by the residents.
While an airport could boost the local economy, it also creates tremendous noise and traffic. T
his reduces the suburb’s desirability to both renters and buyers, unless they work there.
Renewing your driver’s licence is at most a once a year job.
So it’s not of big appeal to potential locals.
“A set of government agencies under the one roof might be better but it is still infrequently visited – enough for it to be overrated,” says Sheppard.
Churches and other religious centres
Even people who claim to be a member of a religious group don’t frequently visit their religious centres, and at most only go twice a year.
As such, having a church or a place of worship isn’t necessarily going to boost demand in an area.
Skate parks and some basketball courts might keep kids entertained.
But they might also attract a certain type of kid, eager to fit in and prepared to do stupid things to win favour with peers.
We’re quickly becoming a cashless society and these devices usually loiter around places to spend the cash anyway.
They make you feel safer, but having a police station in an area doesn’t necessarily translate to higher demand.
Train stations don’t actually drive growth so much as the use of them.
If the train station is not well-maintained and not well-serviced, it won’t carry much weight in terms of driving demand in the area.