Cultural Shift Changes Investment Property Consumption

September 25, 2012 1:21 pm
posted by James Parnwell

investment property

Housing in Australia is undergoing a cultural shift, as the quarter acre block previously aspired to is increasingly overlooked by a new generation of buyers focused on financial security and lifestyle. With this shift comes the acceptance that in the future there will be a greater reliance on investment property and enduring demand for well located, quality apartments.

This was a recurring theme at the recent 7th Annual Housing Congress. This event brought together high profile delegates from Government, local councils, industry bodies including the Housing Industry Association and the National Housing Supply Council, as well as many other delegates. Aviate Group Managing Director Neil Smoli was a headline presenter at the event.

As a country Australia is undergoing a fundamental shift as to how we are living and how we want to live. While affordability is of course a major driver of this change, the reality is that for many people, particularly younger people, the aspiration to own a house with a backyard and picket fence is not as evident as it once was.

GenX and GenY have a significantly different attitude toward home ownership compared to previous generations. They value mobility and are less inclined to commit to a long-term mortgage.

However the desire for financial security, especially in the context of a challenging economic environment, remains as strong as ever. The combination of these truths is that the nature of the housing market is evolving and a shift to embrace apartment living en masse is the emerging result.

Investment Property Trends

Demonstrating this shift is the increasing prevalence of people investing in apartments for financial security reasons while renting in a location that suits their contemporary lifestyle needs. Not every tenant is unhappy renting and for some it’s a preferred option.

While the positive fundamentals of residential investment property as an investment class remain apparent, we are seeing a new direction as to how property is actually being consumed in this country from an owner-occupier, investor and tenant perspective.

Growing families are increasingly looking to apartments or townhouses to satisfy their need for proximity to work and are comparatively more affordable. This trend is relatively new in Australia, but is well established in global cities such as those in the US, Europe and Asia.

investment propertyAustralia is unique in that it’s such a physically large country yet only has a few major CBD markets operating in geographic isolation from each other, amidst a population that continues to grow. As the gap between underlying demand and new housing supply widens, more and more workers in CBD markets will be looking to well located, quality apartments to satisfy their lifestyle needs and a greater reliance on rental properties will eventuate.

Even though we are seeing more and more singles and childless couples preferring this option, young families are not eschewing the notion of apartment living either. This phenomenon is already well established around the world and we are heading the same way.

Specifically, this cultural shift is resulting in steadily increasing tenant demand for one bedroom, one+study and two bedroom apartments in near CBD locations. Studio apartments are only suitable for a narrow tenant profile and have a limited resale market, while the premium for the extra bedroom in three bedroom apartments doesn’t translate into increased yield and therefore makes it arduous for the typical investor to hold over the long term.

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