Interested in property investment? If so, you probably want to make sure your portfolio is successful and will grow in value. But with so many pieces to the property research puzzle, how do you make the right decisions to ensure positive outcomes? I believe demographics will hold the key to the future of our property markets. How many of us there are, how we want to live and where we want to live will be more important factors shaping our future property markets than the short-term ups and downs of supply and demand, consumer sentiment or interest rates.
This means understanding Australia’s lifestyle and demographic trends will provide you with the type of insight you need for constructing a successful property investment portfolio. So, let’s have a quick look at some interesting Australian demographics trends and their implications:
Our population is ageing
Our baby boomers are becoming empty nesters and as a result their lifestyles are changing. Many are getting ready to retire from work, downsize the family home and travel more. Most won’t be looking at sea or tree changes, however apartment living that boasts security and requires much less maintenance will be attractive to many of them.
Our population is changing
The average number of people living in each household is decreasing as the proportion of lone-person households, couple-only and single-parent-plus-dependent-children households are on the increase. This means there’s less demand for sprawling properties with four bedrooms and more demand for smaller, medium-density properties.
Our population is growing
Our current population is 24 million and even though population growth is slowing, it’s estimated this will increase to 28 million by 2026 (that’s just 10 years away).
Close to four out of five of this increase – some 3.2 million people – is expected to be housed in our capitals, and mostly in Melbourne (925,000), Sydney (820,000), Perth (710,000) and Brisbane (530,000). This means we’ll need to build some 1.72 million new dwellings in the next 10 years, of which 75 per cent (or 1.3 million) will be in our capitals, and higher density housing is easier to supply.
In fact, building approvals for high-density housing are quickly catching up to detached houses in Sydney and Melbourne in particular, with Brisbane and far behind.
Our first homebuyers are struggling
The property market is coming less accessible for first-time homebuyers. Housing affordability, in our capital cities in particular, is among the most expensive in the world. Many more first-time homebuyers are willing to compromise their housing preferences just to get into market and start off buying an apartment rather than a house. Others become renting investors, renting where they choose to live and buying an apartment as an investor.
Our preferences are changing
Generation Y has different preferences to the generations before it. There’s an increase in the number of people wanting to live in the inner-city or close to the CBD so they’re closer to work, social life and attractions, and apartments are much more convenient for their lifestyle. The bottom line is these demographic trends have some important implications.
Apartment living is on its way to becoming more popular than ever: it’s certainly superseding the quarter-acre block as the Great Australian Dream. These changes in Australia’s lifestyle preferences are indeed having a ripple effect on the economy and they also mean significant and lasting changes to the real estate market. So, now that you’re 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’s worth considering how to diversify your property portfolio to include an inner suburban one- or two- bedroom apartment. 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 some winners and some bad eggs out there.
Michael Yardney, Australian Property Investor, April 2015