Give Them What They Want

Posted by Daniel Joseph

One of the great messages from our seminars is simple: don’t think about what YOU want when purchasing an investment property, think about what the world will look like when it comes to sell in the future. While we can’t accurately predict exact future circumstances, we are witnessing a significant shift in Australians’ attitudes towards housing that will present a markedly different housing dynamic in the future. Blue Wealth is currently recommending, not exclusively of course, established inner city areas close to amenities and lifestyle drivers.

This is for a number of reasons.

One of them is the KIPPERS phenomenon. KIPPERS, for those who don’t know, stands for Kids In Parents Pockets Eroding Retirement Savings, and this writer is one of them. People now want to live in desirable areas close to amenities such as bars, clubs and restaurants and be close to work and/or transport connections. They are also perfectly happy to stay at home until they can afford these places, whether renting or buying. Interestingly, when I speak to many of my friends, they’ll equate potential moves with how much that will cost to get home in a taxi after a night out, or if there’s a good cafe or pub nearby. Assisting this, parents are now more accepting of children staying at home for longer periods.

Another reason for this apartment shift is that big backyards, for this generation, aren’t all they’re cracked up to be – it takes time and effort to maintain them. Are we lazy? Maybe … or maybe we think we could be out enjoying our weekends instead of looking after the garden all day.

‘But young families will always want more space,’ I hear many people saying, and that has traditionally been the way! But families are now significantly smaller than in previous generations, needing far less space, and people are starting them later once they are financially secure or have achieved some of their life goals. People are being not necessarily more selfish, but more independent. Consider this: I am now an anomaly as the youngest of five children, and my parents were in their mid 30s when I was born. How many people’s parents have a similar story to this? Nowadays, many couples have not even started a family at that age. We are on the whole doing things later in life, to our independent benefit.

Now, this is all very well to say, but how about some facts to support it?

In the last 30 years, the average Australian household size has dropped by almost 25 per cent, or one whole person, to 2.6.
Apartments and townhouses accounted for 35 per cent of new housing construction in the three months to 30 September 2012, compared with 29 per cent five years earlier and 21 per cent twenty years ago.
The number of apartments and townhouses begun in the past five years has increased 22 per cent, while housing begun has fallen 19 per cent. Approvals for apartments and renovations jumped 10.1 per cent in November from the previous month, while permits for private houses dropped 0.3 per cent according to government figures.
Stockland, the nation’s biggest listed housing developer, had a 35 per cent drop in profit in the year ended 30 June, and their shares fell 4.9 per cent in the two years through to January. This compares to a 21 per cent jump in shares of Mirvac Group, whose profit more than doubled in the year to 30 June and who are currently building one of Sydney’s biggest apartment projects.

This is a broad trend – every specific area’s ideal investment will depend on the area’s macro drivers – but if you look around and speak to people you will hear the same thing as what I have written here. So, when investing consider this: give them what they want – established areas close to lifestyle amenities and employment hubs, NOT necessarily blocks of land hours from infrastructure and amenities. The key is to buy them well – bigger, well designed units that will stand the test of time and allow people to share the units or families to stay in place for longer. That is why Blue Wealth is so strict on unit size and design criteria and will deliver great investments for our clients.

Posted by Daniel Joseph, on 19th Jun 2013