I’ll get straight to the point…
I believe the inner and middle ring suburbs of our big capital cities will be the best medium to long term investment locations.
Here’s my logic…
There’s little doubt that Australia’s population will double in the next 40 – 50 years.
Thing about that – another 25 million people will be living in this beautiful country and our five big capital cities are likely to accommodate around three-quarters of this population growth.
In other words, Sydney, Melbourne, Brisbane, Perth and Adelaide and will double in population over this period, with Melbourne likely to do a bit better than the others and Adelaide will do a bit worse.
So where will this substantial growth occur?
All our capital cities have their town planners working furiously on future plans and what is well recognised is that the future growth won’t be spread evenly across the metropolitan areas.
Our CBDs will Manhattanise with more of us living in these central hubs and the many high-density developments that will ooze out into the inner suburbs.
Sure this trend may slow a little after some of us will change our preferences following the coronavirus pandemic, but over the long term this trend will continue.
Town planners are also envisaging less intensive medium and high-density apartment development spreading out like tentacles, primarily along the main roads and along railway lines and along transportation arteries.
Their logic is to deliver this type of higher density apartment product within a relatively small area along main roads and in and around established commercial districts
But I’m sure you realise that this “investment stock” product is very different “investment grade” apartments that make good long term investments.
That’s because these developments offer little if any scarcity value or owner occupier appeal and with so many new apartments developments on the drawing board, investors have no control over the number, location, style or price-points of the many new apartment projects coming out of the ground.
While these developments serve a purpose in providing accommodation for many students and first time renters, I feel many of these high rise monoliths will become the slums of the future, especially as they have very few owner occupiers and many have a large proportion of overseas investor owners who can’t even make it to the Owner’s Corporation meetings.
Then there are all the construction issues that are just starting to emerge - watch this space more shoddy building practices will come to light creating substantial loss for the purchasers in many high rise buildings.
Sure there are some exceptions that are well located and well configured for owner occupiers, but in general the typical off the plan or new apartment does not make a good investment.
But demand for new housing won’t stop
Much of it will be soaked up in these new apartments in the inner ring and then there will be all the new houses built in the new estates in the outer ring.
While these will provide accommodation for those who need it, neither of these types of dwellings make good investments.
So what’s the answer?
We need more medium-rise family size apartments and townhouses in the established middle ring suburbs of our capital cities.
We will need more housing that fits between the small apartments that are currently being built (usually downtown and in large, soulless complexes) and traditional detached homes.
This housing is often, these days, described as the “missing middle”.
The following schematic from Michael Matusik explains this concept well.
The missing middle
Much of the demand for these townhouses in our middle ring suburbs will come from aging Baby Boomers who will be looking to downsize in their local area.
They will have equity in their homes but won’t be looking for sea change or tree change – they want to remain close to the amenities and facilities they’ve become used to.
These new townhouses and family size apartments will also become home to younger generations who will trade backyards for balconies and courtyards because they want to be five to fifteen ‘kilometres from the city centre to minimise the commute time.
This demographic will also want to have easy access to the cafes, bars and restaurants of the hipster zone as well as to major knowledge worker institutions near and around the inner city.
As our big capital cities get bigger, competition for accommodation in their inner and middle ring suburbs will intensify, especially in the train-accessible suburban zones as our roads become more congested.
And both the Baby Boomers and younger well to do demographic will not only want to, but they’ll be able to afford to buy or rent townhouses in these locations.
Think about it…
As our cities grow and expand, a premium will be attached to townhouses.
More of us want to live in large modern accommodation on compact blocks within striking distance of the trendy inner city because of their considerable land component
That’s one of the reasons we’ve been project managing and constructing town house developments for clients of Metropole for the last 20 years.
We manage the whole projects from construction to completion – you can read more about our development project management services here.
We help our clients get their finance and ownership structures organised, we located the old knock over properties in good locations, conduct feasibility studies and help our clients purchase their properties.
We then take care of all the town planning, development and construction process and then hand over our client’s projects to the team at Metropole Property Management.
What can you do about this?
Sure the property markets are improving, but in today’s property markets, it’s just too hard to make money being a passive investor.
On the other hand it’s a great time to buy an old house with development potential and “manufacture” your own capital growth through property development.
The idea in property investment is to spot property value uplift prior to anyone else.
Using big picture demographics, it’s possible to theorise about how our cities will work and change over coming decades.
I think that the next hot zone will be the inner-middle zone of our biggest capital cities.
Why not contact us at Metropole and explore your options — just leave your details here.
Here’s some of the ways we can help you:
- Become a developer – If you would like to become what we call an “armchair property developer”, we will provide all services for you from finding the right property, project management to construction. Read more…
- Project management – If you have already purchased a property you would like to develop and have a preferred construction firm, you can choose to use our project management services only. Read more…