A New Trend in Investment Property Purchasing

October 31, 2012 1:03 pm
posted by James Parnwell

investment property


We recently discussed the cultural shift that’s occurring in the way Australians consume housing, and the opportunities this opens up for investors. Interestingly, this investment property trend is already well established overseas and its emergence in Australia is evidence that our major cities are beginning to imitate their major international counterparts.

Singles, couples and families are increasingly looking to apartments or townhouses near CBD locations because they are close to work and are comparatively more affordable. While this trend is relatively new in Australia, it is well established in global cities in the US, Europe and Asia.

Consider Sydney as an example.  The price of a house in Sydney in any inner ring suburb is simply beyond the means of the average income family. At the same time, more affordable outer lying suburbs are faced with inefficient or even non-existent infrastructure for CBD workers, making these areas less desirable.

Hence apartments and townhouses are becoming an increasingly attractive investment property alternative.

The way Sydneysiders are shifting their allegiance from the quarter acre block to more contemporary apartment living options, whether as owners or tenants, is indicative that Sydney is now truly an international city.

It’s an investment property trend that is set to become more widespread to encompass other major CBD markets in Australia. One to two bedroom apartments in convenient locations close to transport, retail and dining amenities and other social infrastructure are already experiencing robust demand and as our housing/investment property market continues to evolve, this demand is set to increase steadily going forward.

This has already manifested itself in more mature overseas cities like New York, London and Shanghai. Australia’s major cities are simply following a natural evolutionary path.

Investment Property Trends

In Melbourne, the investment property cultural shift is most evident in suburbs including Collingwood, Fitzroy, North Melbourne and Prahran. These areas are attractive to renters due to their proximity to work and have a cosmopolitan retail and restaurant scene that complement modern lifestyles.

Brisbane suburbs including South Brisbane, Morningside, Lutwyche, Stafford and Windsor are experiencing the same demand from renters, translating to heightened interest from investors.

In Sydney, the enduring demand for rental properties in Surry Hills remains as robust as ever, while the trend for apartment living extends to areas like Petersham, where there is not only proximity to the CBD but more importantly, easy access to it.

The anomaly at this stage is Perth, which is a case of its own, the two speed economy driven by the resources sector skewing Perth’s evolution so it is not necessarily in line with other major CBDs.

It’s important to qualify that the shift to apartment living is not focused on true CBD locations but rather fringe markets. If anything, there is a shift from renters and owner-occupiers away from CBD living to a more cosmopolitan fringe, and as such this is where investors should focus their search for properties.

Property Investor Caution

Our property investor surveys consistently indicate true CBD residences are not viewed as ideal by tenants because of excessive noise associated with services like garbage trucks, a lack of disconnect between work and leisure, and the fact CBD areas can become a ghost town after the working day ends.

Additionally, CBD apartments are usually larger developments and large developments have specific disadvantages from an investment property perspective.  For example, the high number of apartments creates competition for resale and the ongoing costs such as strata fees are higher.

Instead, it’s one, one+study and two bedroom apartments that are dominating the trend and will continue to do so in the future.

Article by Aviate Group

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This article is not designed to provide personal financial or investment advice. The information provided is general in nature and does not take into account your particular investment objectives, financial situation or investment needs. We recommend that you speak to your financial Adviser before you make any further decision.



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