This may seem obvious, but I have to start with it… in order to create long-term wealth from property it will be important to own the type of property that will be in continuous strong demand from both owner occupiers and tenants in the future.
That’s why recent population data from the Australian Bureau of Statistics is instructive to property investors. To understand what’s going on let’s do a quick Q&A.
How fast are we growing?
Over the year to June 2011, the country’s population is estimated to have increased by 1.4%, which is faster than almost every other developed nation. However population growth has been stronger across the capital city markets (1.6%) than in regional areas (1.2%).
Where do we live?
Since 1996 there has been a steady increase in the proportion of the country’s population living in the capital cities and given that the capital city markets tend to enjoy higher wages and have better job opportunities this trend is likely to continue.
Today around 64% of our population lives in one of our eight capital cities. In fact, 60.9% of us live in the big five – Sydney, Melbourne, Brisbane, Perth and Adelaide.
What does this this mean for property investors?
I understand why some investors are attracted to investing in regional Australia – properties are cheaper there and some may even return a little positive cash flow.
While some better performing regional areas have outperformed the poorer performing capital city suburbs, the trend is clear – in the long-term, population growth and capital growth in property values in our main capital cities will eclipse growth in regional Australia.
I have always avoided investing in regional towns because of their heavy reliance on one or two industries to sustain their local economies and population. Remember, when those industries take a battering, it’s not long before local house prices start to bear the brunt.
Instead I look to invest in areas where property values will be driven up by a large and growing population base, a diverse economy and the scarce supply of well located properties.
While there’s no doubt that the future population growth of our capital cities will create infrastructure and social problems, the fact that we all want to live in the same cities, and in general, in many of the same suburbs, will underpin the capital growth of properties in these locations.
What about changing demographics?
Interestingly how we want to live is undergoing some radical changes, which means the type of property that will be in strong demand by owner occupiers and tenants in the future will be different to the past.
In 2010 around 150,000 new households were created in Australia and approximately 65,000 of these comprised Gen Y singles, groups and couples.
Many choose to rent in shared accommodation in order to reside in the locations they favour, but can’t afford as a homebuyer. These include the 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.
The way we live today is vastly different to our parents.
People are getting married later in life and apartments suit their busy lifestyles. 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.
With the number of Gen Y’s looking for accommodation continuing to rise, rental demand for near city and inner suburban 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 keep rising, as will their values, as higher yields will entice investors back into the market and lifestyle attracts owner occupiers .
But do apartments make good investments?
In today’s market apartments make great investments and in general appreciate in value equally, if not more, than houses in our capital cities. It should be fairly obvious that with more single households, two person households and smaller families this trend will continue in the long-term.
With housing affordability becoming an increasing issue we are seeing a rise in the popularity of medium density apartment living.
And this trend is likely to continue because it’s about much more than affordability. As I’ve already explained, significant changes in our population profile and lifestyle priorities are creating a strong demand for apartment living. At the same time apartments are continuing to improve in design and size and are generally closer to the CBD than affordable houses.
What about the Baby Boomers?
Let’s not forget that as baby boomers move into retirement, they will also significantly increase the demand for townhouse and apartment living. Low maintenance, secure “lock and leave” living will be a priority for this demographic.
According to RP Data, capital city units and apartments only accounted for 25% of all home sales 15 years ago. Today though, medium and high-density accommodation makes up around 35% of all home sales.
Now that’s an interesting trend, isn’t it?
If you’re looking for a great investment property you should seriously consider well-positioned, established apartments in smaller boutique blocks in our capital cities. Look for a property with an element of scarcity or maybe the ability to add value through renovations.
Then hold it as a long-term investment and reap the rewards.
Now if you want to really get ahead of the pack and make the most of your property investment, I recommend you join me for 3 days at my annual “Property Renovations and Development World” that I’ll be holding in October.
It’s Australia’s longest running, advanced property training and it will be your chance to invest 3 powerful days and learn renovation and development strategies that experienced property experts are using around Australia to “manufacture” capital growth and generate strong rental returns, so that they can win in today’s challenging property markets.
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I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole Property Strategists.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is independent and unbiased. If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney and Brisbane or with our associates in Perth. Just click on this link to find out more and reserve your place.
Of course I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but as so much is happening in property nowadays I’ll keep you updated almost every day with a short post in my blog – just click here – it’s a different subscription to my regular newsletter – it gives you my short daily updates.
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