Gentrification

Posted by Luke Graham

Gentrification is the favourite word of many in the world of property investment. Unfortunately for the vast majority, the real winners of gentrification are those that get in early when everything isn’t so fine and rosy.

Taking the bold step into an area in need of gentrification can be daunting, particularly when there are some around you challenging the decision. ‘Don’t invest there, the crime rate is high’ is what people were hearing only a few years ago in Parramatta where today the median apartment price is approaching $500,000.

The wharfies of Woolloomooloo, Sydney would be surprised to learn that famous actors, musicians and social commentators are now residing within the very sheds in which they compressed wool to load onto cargo ships one hundred years prior.

The million dollar question of where gentrification is destined to happen next can be answered by considering the four pillars of property investment.

Supply and Demand: What is the underlying cause of a lack of demand in the area that has resulted in limited price growth?

Economics and Employment: What primary industries exist in the area and how is this beginning to change, what new businesses are starting?

Population and Demographics: Typically, an unfavourable demographic exists in an area left behind. When did this demographic arrive in the area, why this area particularly, are any changes beginning and what would cause the demographic to change completely?

Infrastructure Investment: Has government and big business noticed that the suburb has been behind, what remedies are they implementing to encourage economic activity and who are they trying to target with new infrastructure?

These are just some of the many factors at play in assessing how successful gentrification will be in an area. As Australia’s economy continues to transform, areas that were initially unfavourable are becoming the hottest areas to invest. In saying this, it would not be wise to dive into an investment because it is in an unfavourable area. Instead, the four pillars of property research need to be considered thoroughly in order to determine the underlying value in tomorrow’s trendy towns.

Posted by Luke Graham, on 13th Jan 2015