WHY EVERY INVESTOR SHOULD UNDERSTAND GENTRIFICATION
Gentrification can occur in property markets across all of Australia, from big cities to coastal towns. Astute property investors can capitalise on the process that unfolds if they know what signs to look for.
Firstly, what is gentrification and why should property investors care?
Gentrification is the changing character of a suburb through the influx of wealthier residents moving into the area over time pushing out the low-income residents away, improving many qualities of that market.
The gentrification process can potentially lead to property values being pressured upwards as well.
Gentrification occurs on the back of new and improved housing due to wealthier residents either improving their existing property through renovation, taking the knockdown and rebuild approach, or purchasing a quality new property, improving the overall character and feel of that suburb.
A market going through gentrification will also typically experience many new and improved qualities that attract both potential home purchasers and investors alike.
These qualities can include additional or improved infrastructure and transportation, new businesses, cafes, shopping centers, schools, hospitals, and sport and recreation facilities to name a few.
How to identify a market going through gentrification?
3 key influences to look out for include:
1. Demographic trends.
Demographic trends are key when it comes to gentrification. Researching the different census periods can reveal key trends of gentrification that may be taking place within a specific suburb. Employment is always a crucial fundamental for a highly demanded market and the percentage of certain professions can reveal a growing demographic. For instance, between the last two census periods has there been a strong increase in professionals and managers within the suburb? Professionals and managers generally earn a strong and steady income allowing residents to spend more on that specific local economy and in turn assist the overall gentrification process having a positive impact on that market also.
As investors, we can also determine if the population of a given suburb is currently earning a strong income compared to the state average and if there has been a healthy increase in the median wages between the previous census periods. The higher the overall income of that market can give us a deeper understanding of the people of that market can push prices up moving forward.
As you can see, these trends can reveal key aspects of the gentrification process early in the process and can give us investors foresight into markets for potential investment.
2. Transportation Infrastructure.
will always play a crucial role in the growing demand for a specific market. Improved road systems, new and improved railway, and additional bus services will continue to drive more residents to a suburb due to improved connectivity, create additional employment and these key projects can play an integral role in the overall gentrification process.
3. Council Planning and Additional Infrastructure Spending.
Information on council strategic planning, the yearly budget breakdown as well as government and independent infrastructure spending can generally be found online and can provide investors great potential insight into gentrifying markets.
Online data can provide investors with the sheer amount of jobs that will be created within a city or suburb that can have a direct impact on the surrounding markets. This is due to the additional underlying demand being created and the potential upward pressure on property prices.
Desirable amenities such as shopping and entertainment precincts, cafes and restaurants, new and improved schools and new employment opportunities will not only attract and drive demand to a specific suburb but as gentrification progresses at the same time, property prices will generally follow suit.
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Jarryd Gauci – Property Investment Consultant
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.