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As a property investor, if you can pick an area going through gentrification, one that’s shifting from dreary to in demand, you can benefit from…

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One of the significant changes in the way we live in Australia over the last few decades is the gentrification of our inner suburbs.

When I was young, housing in the inner suburbs was cheap and home to the working class and migrants being full of single fronted terraces, pubs and factories.

Also read: Here’s how much property prices need to drop for you to get on the ladder

But within a few decades, the process of gentrification saw these ugly duckling suburbs transformed into graceful swans as higher income households displaced blue-collar workers; changing the character of these neighbourhoods and resulting in a significant increase in local property values.

What caused this gentrification?

One of the main factors behind this revitalisation was the exodus of manufacturing to the suburbs driven in part by cheaper transport and better roads.

At the same time many migrant workers departed to the suburbs to live in detached houses with front and back yards.

Also read: Is Australia facing a sub-prime housing crash

Interestingly at much the same time our society started to experience higher education levels which necessitated more people being closer to campuses, that were usually in or near the CBD.

Similarly, the diversity of serviced based jobs located in the CBD, the increasing number of women in the workforce, declining household sizes and lifestyle all made living in those smaller properties near the city more attractive to a larger cohort of potential buyers.

Of course, it should come as no surprise that this increasing demand led to house prices in the inner-ring rising much faster than in the outer suburbs.

Identifying gentrification

Gentrification is a change in the fortunes of a suburb as it is discovered by a higher income demographic which slowly pushes out the lower income residents.

These new, more affluent residents invest time and money improving their new neighbourhood, pushing up prices and rents.

As these changes take place the area loses its stigma and more individuals on higher wages move in, putting further upward pressure on values.

Also read: House price falls are accelerating in Melbourne and Sydney

Looking back, one of the significant transformations of our inner suburbs was that household incomes grew significantly as residents were better educated and had higher-paying jobs.

Two incomes in a household instead of one meant that people had more money to spend on housing – and spend it they did!

Therefore, one of the keys to identifying a gentrifying location, one where property values will increase above average, is to find suburbs where incomes are growing, increasing people’s ability to afford and pay higher prices for property.

Digging into the Census data shows that while wage growth has been slow over the last few years, there are some suburbs where wages have grown 40-50% more than the State’s average.

You’re likely to find these suburbs are home to a number of other identifying features of gentrification such as top-end cafes or restaurants as well as higher-end stores where the wealthier population can spend their money, because that’s what they generally do.

The secret to identifying gentrification, therefore, involves researching locations where a number of economic factors are changing at the same time.

To make things clear…just because a suburb has cheap properties doesn’t mean it’s destined to become the next growth area.

Some suburbs are inexpensive for a reason and won’t improve because of various socio- economic factors.

There might be too much industry in the area, a lot of social / public housing or possibly a crime, gang or drug problem. Or maybe they are outlying suburbs with poor infrastructure, facilities or public transport.

Also read: The REAL reason we’re seeing a property slowdown

On the other hand, the type of suburb to look for is one that is relatively cheap today but has the potential for future capital growth. Some of the major drivers of capital growth are:

  • Proximity to the city or the water.
  • Adjoining a more expensive neighbourhood so it can benefit from the ripple effect.
  • Desirable amenities such as good public transport, a large shopping centre, or within the catchment of a highly prized public school.
  • Older attractive houses with character features, that are ready to be renovated.
  • Areas where governments are investing in local infrastructure or beautification programs.

So what do you look for in a suburb?

Some of the steps you can take to find a suburb that is improving is to go for a drive and a walk.

You’ll “know it when you see it” because you’ll find evidence that people with money are moving in.

  • They will be spending large amounts of money renovating or extending their homes.
  • There will be white (the new black) SUV’s parked in the driveways rather than old Toyota Camry’s or Holden Commodores.
  • The nature of the shops is changing. The gyms are offering Pilates; the cafés sell cold press coffee, and the deli’s serve goat’s cheese pizza.

As a property investor, if you can pick an area going through gentrification, one that’s shifting from dreary to in demand, you can benefit from its accelerated growth.

And the good news is that you don’t have to get your timing perfect – the gentrification process lasts a number of decades.

Best Regards

Linda 姬琳达珍 and Carlos Debello (LREA)

LJ Gilland Real Estate Pty Ltd

Request FREE Rental Appraisal here!

"Your Local Property Management & Sales Specialists"

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ZILLMERE 4034
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A new report has revealed the number of Australian homes generating a resale profit has declined, with national resale gains the lowest they’ve been since October 2013.

A new report has revealed the number of Australian homes generating a resale profit has declined, with national resale gains the lowest they’ve been since October 2013.

https://ljgillandrealestate.wordpress.com/2018/09/20/a-new-report-has-revealed-the-number-of-australian-homes-generating-a-resale-profit-has-declined-with-national-resale-gains-the-lowest-theyve-been-since-october-2013/
— Read on ljgillandrealestate.wordpress.com/2018/09/20/a-new-report-has-revealed-the-number-of-australian-homes-generating-a-resale-profit-has-declined-with-national-resale-gains-the-lowest-theyve-been-since-october-2013/

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Property market ‘falling off a cliff’ – news.com.au

For those property investors who watched 60 Minutes on Channel 9 last night:

1) Often the media only shows one side of the story to create more drama

2) Being a property investor is a bit like being an entrepreneur – there will be some ups and downs – it will make you stronger 对于那些昨晚在9频道上看了60分钟的房地产投资者: 1) 媒体通常只展示了故事的一面, 以创造更多的戏剧 2) 作为房地产投资者是有点像Property market ‘falling off a cliff’ – news.com.au

https://apple.news/AV7LFLpccQ9CKaC1LypyJ7w

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There are signs Australia’s housing downturn is now dragging on the economy | Business Insider

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Living with mould: The ‘tightrope walk’ between landlords and tenants – RN – ABC News (Australian Broadcasting Corporation)

http://mobile.abc.net.au/news/2018-08-15/living-with-household-mould-in-australia/10088802?pfmredir=sm

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Population boom creates long-term opportunities for property investors | afr.com

Population boom creates long-term opportunities for property investors | afr.com

https://www.afr.com/personal-finance/strong-population-growth-creates-longterm-opportunities-for-property-investors-20180806-h13lyp

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A real estate agent in the Inner West region of Sydney has been convicted of stealing more than $210,000 in rental bonds.

36-year-old Matthew Thomas Williams pleaded guilty in Paramatta Local Court.

As a real estate licensee, Mr Williams could access the Bonds Online system to lodge bonds on behalf of the tenants of his agency.

He later then reclaimed the bonds. He did this for 42 separate ongoing leases.

Mr Williams accessed the bonds illegally while working for unnamed agencies in Darlinghurst, Double Bay, and Glebe.

He was sentenced to two 15-month jail terms, but they were suspended pending a period of good behaviour. He was also disqualified from the real estate business for 10 years.

A bond (as our readers surely know) is a fixed sum renters pay up front in case they cause damage to the property. If all is well, that money is refunded to them when they leave.

NSW’s Minister for Innovation and Better Regulation, Matthew Kean, said Mr Williams had accessed client details, and then directed the bond refunds to his own account.

"For almost two years, Williams used his position of trust to claim the rental bonds of tenants, and used the money primarily for gambling.

"This was a planned and ongoing act of deception that was uncovered and reported to Fair Trading by his employer after a tenant requested a bond refund.

"This kind of behaviour is utterly reproachable. It erodes the trust between real estate agents and tenants and general trust across the industry."

Leo Patterson-Ross, Senior Policy Officer at the Tenants’ Union of NSW, said this case illustrates the power imbalance between landlord and tenant.

"This case demonstrates the need for a rethink of the bonds claim system. The bond is tenants’ money being held on trust. So the bond money should automatically be returned to the tenant unless they explicitly agree to the landlord’s claim or the Tribunal has made orders.

“We also want to see Fair Trading investigate more – only a handful of fines are issued a year under the Residential Tenancies Act 2010 and this sends a message to landlords and agents that there are no consequences for breaking the law."

Under the current system, according to Mr Patterson-Ross, it is up to tenants to follow up with any bond issues via the NSW Civil Tribunal.

But most cases are decided in the landlord’s favor.

He further claimed NSW Fair Trading does not properly priorities tenancy matters, as they do other sectors of the real estate market.

Leanne Pilkington, president of the Real Estate Institute NSW, said Williams had gotten off lightly.

"I think it’s an absolute disgrace. I’m glad he has been caught and I think he should be jailed. I think we need to take a firm stance on it.

"That’s why we need better education and we’re following a pathway to creating professional standards and becoming a recognised profession and we need to weed people like that out of the industry.

"It’s going to be harder to become and continue to be an agent [with the industry reforms].

"There’s more requirements on the licensee in charge. If this person was supervised properly he would not be able to do this."

According to NSW Fair Trading, the tenants who were affected are in the process of having their bonds re-lodged.

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