A profound change is taking place in the centre of some of Australia’s major cities and this article is to help you to understand what those changes are and how those changes will affect you and the generations to follow you. This transition is happening, cannot be avoided, and regardless of whether you are an investor or an owner-occupier, not understanding the changes that are taking place in the market could result in you losing opportunities.
Worldwide there is a trend for the populations of industrialised countries to move towards the central infrastructure of the main population areas. Australia is no exception to this trend. We’ve all read and continue to read how our economies are changing, how industries that supported many of the world’s work forces are shrinking and in countries with small population bases such as Australia, these industries are dying out altogether. An example of course is the closure in Australia of motor vehicle manufacturing.
So why is this so important to you, your family and their families to follow. The answer is that most of the new industries will be high tech, high value adding, and most of the jobs in those new industries and industries yet to come will be created in the centre of our cities not on the city outskirts where land is plentiful and cheap and where huge factories can be built. There is also an abundance of land for residential properties on the outskirts of our cities but the jobs are not going to be out there and we don’t want to live out there without the incentive of close by work.
In Australia, the status quo for residential property has always been a house on an individual block of land, preferably large (the land that is) and that is what most people aspired to. Many people in Australia today still maintain that nostalgic view of what they feel has always been an ideal residential property. If you haven’t noticed, even the affordable new blocks of land being developed on the outskirts of our major cities are less than half the size of housing blocks that used to be the norm. You certainly can’t play cricket in those back yards.
As our cities continue to grow larger we are experiencing a changing in demographics both in respect of household formation, the number of people who will live in each household, and, because of Australia’s strong immigration intake, where the housing choices in the countries they emigrated from may have been very different, many of our new residents are prepared to, in fact choose to, live in something other than a house on its own block of land.
With the massive population growth that is occurring in our cities we are going to experience the same changes that occurred many years ago in other major world cities, for example London or New York. Perhaps you have been fortunate enough to have been able to visit some of these large overseas cities. The idea of being able to afford a house on a single block of land in the centre of one of those cities would be completely fanciful for all but a very privileged few.
In Australia, we are beginning to see what is an almost grudging acceptance that it is basically impossible to afford a home in the inner city suburbs of one of our larger capital cities. Our newspapers are full of articles on this topic, talkback radio bombards us with stories about how difficult it is to get into the housing market and even worse the subject has become a political football. Heaven help us!
Whilst the thought of the changes that are occurring is perhaps confronting or challenging for you, this is not something that we should be fearful of or disappointed about. Change always brings with it opportunity and nothing can or will stay the same forever. Those who recognise the changes that are taking place earlier in the cycle generally benefit most.
Given that the problem is that if more of us want to live in locations close to the centre of our cities the cost of land in those areas is going to continue to increase in value making property prices rise even further. So, what is the answer to our increasingly large populations most of whom want to live close to the city? For property to be affordable where we want to live we have no alternative other than to increase the density of our buildings on this increasingly expensive land and thus enable us to reduce the land cost for each property in those locations.
Good design of the properties in these increasingly expensive inner city locations is the key and will be how we can accommodate more people in our cities within a 30-minute journey to work, school and other amenities we all seem to like so much. The designs of these properties will include smaller properties (not too small) with living space for singles or couples and some larger properties where spaces can be a little larger and properties can be designed to allow for family living.
These new homes if designed correctly will be suitable for long term residential use for all categories of home owners. These properties will still be expensive, but much less expensive than individual homes on their own blocks of land in the same area. This will in effect improve housing affordability in those inner city areas where more people want to live.
People are already choosing amenity over space however and this trend will continue to grow if the location and design of the new properties we are building meet the needs of more of our families. For these residential buildings to be desirable they need to be not on busy roads, they need to be close to good sized parks (walking distance so children can meet their friends and play), and they need to be closer to amenities so that fewer cars will be required by families and many of the journeys can be walking or cycling or using public transport.
At Specific Property, we have spoken many times about design and we are now suggesting that what is required is more medium and higher density accommodation in those inner-city areas with floor plans that not only can fit real sized furniture but have spaces that can be multi functioned for dual purpose use. We are constantly on the lookout for properties that meet the criteria that we have discussed in this article. It is not an easy job as many properties simply, as yet at least, do not make the grade.
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