Dude Where’s My Car?

A couple of decades ago the idea of investing in a one bedroom apartment in our capital cities would garner a tepid response at best. Now, single room dwellings are highly sought by both investors and first home buyers.

Yes, this has in part been driven by increasingly strained affordability, but what is often neglected is the growing proportion of Australians who live alone, or couples choosing to delay (sometimes indefinitely) having children. These two subsets of the Australian population have shifted demand toward smaller, well located accommodation.

In a recent article, a case study highlighted the statistically indistinguishable price growth difference between a one and two bedroom apartment in Sydney city over the past decade. Perceptions and populations change, and these ultimately shift demand for accommodation.

The debate that surrounded the merits of investing in a single room dwelling is largely the same as that currently taking place around investing in apartments without a car space. Here’s what you need to know: for the first time in Australia’s history, young adults are becoming less likely to get a car licence than were their parents. A decline in driver licencing has been recorded in New South Wales and Victoria, with licencing rates for people under 25 dropping from 77 per cent to 66 per cent between 2001 and 2015.

A number of factors have driven this phenomenon:

  • Accessibility to public transport
  • Affordability
  • Generation Y are largely forgoing the quarter acre block in suburbia for amenity rich accommodation in the inner city
  • Increasingly stringent licencing requirements

Understanding demographic and cultural evolution leaves us better positioned to plan for the future demand for accommodation. Of course, this doesn’t mean that you should run out and buy an apartment without a car space. Investment decisions must be analysed in the context of the micro demand drivers in a specific suburb, including proximity to public transport, employment and lifestyle amenity.

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