Reading trends in the property market can get you ahead in the long run.
Property investment is a long-term commitment, which is both a blessing and a curse.
Everyone wants to make sure their portfolio is successful and growing in value, but how do you make the right decisions to ensure positive outcomes when so many pieces of the puzzle are unknown?
As they say, information is power, which is why this secret strategy can yield highly successful and somewhat surprising results.
While keeping up with the property cycle can definitely help you buy at just the right time, it is also fickle, stressful and open to interpretation.
Reading trends, however, is a much surer long-term strategy.
Understanding Australia’s lifestyle and demographic trends will provide you with insight for your property portfolio that isn’t going to change overnight, or even in the medium term.
If you can read the housing trends and predict where they are heading in the future you have a major advantage when it comes to choosing your investments.
Let’s have a quick look at some interesting demographics trends according to the Australian Census, as well as the implications for these changes.
1. Our population is ageing
Our baby boomers are becoming empty nesters and as a result, their lifestyles are changing.
They are ready to downsize the family home, travel more and retire from work.Piggy Bank with retirement savings super message
Apartments boast security and require much less maintenance.
2. Our population is changing
According to the most recent Census, the average number of people living in each househould is decreasing, while the proportion of lone-person households, couple only and single parent plus dependent children households are on the increase.
This means there is less demand for sprawling properties with four bedrooms and big backyards.
3. Our population is growing
The population clock shows Australia’s population is fast approaching 24 million people, due to a fairly even spread of natural increase and overseas migration.
The demand for property in general is increasing and medium and high density housing is easier to supply – in fact, building approvals for higher density housing are outnumbering those for detached houses in the Sydney and Melbourne property markets.
4. Our first home buyers are struggling
With housing affordability, in our capital cities in particular, among the most expensive in the world, the property market is becoming less accessible for first time home buyers.
Many more first-time home buyers are willing to compromise their housing preferences just to get into the market, and are even becoming renting investors.
5. Our preferences are changing
Generation Y has different preferences to the generations before it.
There is an increase in the number of people wanting to live in the inner city so they are closer to work, social life and attractions and apartments are much more convenient for their lifestyle.
Putting all this together means there’s no question about it – apartment living in Australia is surging and this will be a lasting trend into the real estate market.
What used to be regarded as the second-rate option for buyers who couldn’t afford a house has now become mainstream – and with plenty of good reasons.
There’s not only the affordability factor, there’s also the ability to be close to services, cafes and transport, and downsizers have the benefit of no lawn to mow and little if any gardening.
So now that you are up to speed on the 'why' of apartment living, you need to start thinking about how to intelligently invest in this type of property.
With all of this evidence, the debate about whether houses or apartments make a better investment just got a lot more interesting.
You really can’t stay stuck in the camp that believes property investment is all about land value and number of bedrooms.
At the very least, it is worth considering how to diversify your property portfolio to include an inner suburban one- or two-bedroom apartment.
Of course, not all land is created equal so it didn’t surprise when Luci Ellis, head of financial stability at the RBA, recently confirmed that capital growth has been stronger in the inner suburbs of all our capital cities than in the outer suburbs.
Investing in apartments still requires the same comprehensive level of scrutiny and due diligence as free-standing homes and, like every type of property investment, there are bad eggs out there – but that doesn’t mean you should write apartments off altogether.
There is a lot of scaremongering that apartments are a bad investment because they are in over-supply.
While it is true that more and more apartment blocks are being built everyday and all are definitely not created equal, the growing demand is pushing up the value of inner suburban land and there are still some great properties to find.
Steer clear of off-the-plan
My advice is to steer clear of off-the-plan apartments and look for properties with an element of scarcity.
A long-time favourite strategy of mine is to seek out a property in a building that has a good proportion of owner-occupants and has a bit of ‘character’.
An apartment like this in a sought-after location usually has a ready supply of tenants and renovation potential, so I can add value and this generally makes a better investment.
Apartment living looks set to be the way of life for the future and all serious investors need to work out how and when they are going to respond to this growing trend.
Read more:
41 suburbs achieving 40%-plus growth
Should you buy a tenanted investment property?
What does 2016 have in store for property investors?
Kate Forbes
Property Strategist at Metropole Property Strategists in Melbourne. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
