Are Apartments Invest-able?

When I was in Vienna earlier this year I had the opportunity to visit Sigmund Freud’s apartment which is now a namesake museum. The building ‘Bergasse 19’ was constructed in 1891 and was where Freud and his family lived for forty-seven years. It was also where he practised psychoanalysis research and consultation until the Nazi annexation of Austria led to his eviction. Apartments appeared in cities well before the nineteenth century and during the reign of the Roman Empire, houses in metropolitan areas were reserved solely for the wealthy. In Australia, however, many of us are still bemused by the concept of ‘apartments’ and their place in our lives and investment portfolios.

There is no doubt if congestion, money and the scarcity of resources were no matter of concern, most (if not all) humans would prefer a larger home. This is why ‘wealth’ is often associated first and foremost with the size of your ‘castle’ in medieval Europe or ‘mansion’ in the contemporary global community. It isn’t just how you appear to others though, it is also about how more space makes you feel. When you win a running race, you throw your arms in the air (taking more space). In meetings, more dominant people will rest their arms on another chair, bench or window sill. The desire for space seems to be biologically programmed into us like the need for air, food and water.

Space, however, isn’t the only thing humans desire. As creatures programmed to be social in order to survive, our need to interact with other people is vital to our emotional wellbeing. We begin compromising on space in order to be closer to hubs that facilitate the interaction and cooperation we feel we need. We have manufactured this through the creation of central business districts, parks, sports, cafes, night clubs, restaurants and community centres which combine our need to socialise with our other primal needs we now classify as ‘lifestyle’.

An increased lifestyle focus is seeing:

  • Professionals wanting shorter and more reliable journeys to work.
  • Humans wanting somewhere to ‘play’ in their highly valued downtime.
  • A desire to avoid chores like cooking dinner and cleaning the house.
  • Delays in having children until ‘ready’, if having any at all.
  • Having less children than our ancestors.
  • A resultant shorter period of having dependents (0-18 years of age).
  • The higher-density ‘downsizer’ phenomenon.
  • The working holiday visa.

Increasingly, the answer to the lifestyle question is higher-density living. From Manhattan-style executive penthouses to seaside luxury condos and everything in between, many are considering lifestyle as a superior priority over excess space for the same or even a lower price.

Of course, there is still significant demand for the traditional family home on a 300 square metre block, but a recent report in the Herald Sun highlighted unit price growth in some Australian cities are starting to exceed that of houses as an immediate result of changing lifestyle choices and demographics in the market.

In conclusion, property investors should be determining where they will find most demand in the FUTURE, rather than clichés they have experienced in the past about land being the only part of real estate that increases in value. The market will be dictated by the value perceived by would-be purchasers, not just the amount of dirt you paid for.


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