Have you ever thought about distance? How far away things are relative to each other. This question came to me while I was stuck in traffic. As I inched my way to work I noticed all the old houses I went past and how a particular street marked the end of one suburb and the start of another. I saw houses gradually change from modern style with backyards to older terrace houses grouped closely together as I edged towards town. It occurred to me that suburbs are side by side, not far from each other, that each neighbourhood has its own feel and identity that reflects its history.
I see suburbs as a small self-contained city, dynamic and vibrant, each with its own challenges. They grow, expand and join up to another suburb which has followed the same process. Our city is comprised of many suburbs that grow and become a part of the whole. This growth over time means we hardly notice the difference. Have you ever revisited the place where you grew up and marvelled at how it had changed? But ask a resident and I’m sure they won’t even notice what has happened while you were away.
Much is made of the need to buy a property within a certain radius of the CBD. Advocates of this theory point to statistics to prove they are right. Historically this is where the growth is they say, so you should buy there. Or should you? Comparing percentages and returns from a historical perspective and blindly applying them to the present assumes that nothing ever changes.
I think its different today. Much of the real estate within that 10k radius is unaffordable and more importantly much of the reasoning for buying there is flawed by history. You see, Apartments and Units are relatively new phenomena in housing and without doubt they have changed the way we look at property today. These existing suburbs were established by families in houses, you could say they were the original house and land packages. They expanded outwards because houses require space. However, now the inner suburbs are expanding upwards because the space no longer exists within their boundaries. The skylines are dominated by high-rise buildings.
This is the big dilemma. There are more apartments being approved and built than the demand. The obvious question is why but equally we could ask who wants to live in them?
The race to build apartments stems from the ease with which they can be built. Its far simpler and more profitable it should be said, to produce a high-rise building containing 300 apartments than it is to build 300 houses. So developers go for the easy solution and continue to churn out apartment blocks for our consumption. The only trouble is we are not keen on what they are putting on the menu.
It’s been estimated that there are approximately 94,000 SURPLUS apartments being built. 94,000!
if we have people coming into this country needing housing why are there so many surplus apartments?
The simple reason is Apartments don’t appeal to most people. Most people want house and land.
Where can you find house and land these days? On the fringes of suburbia, of course. Think Truganina, Tarneit, Craigieburn in Melbourne or Kellyville, Penrith in Sydney and Ormeau, Coomera in Brisbane as examples.
Demand and supply are always interconnected. There are many house and land packages being offered in these suburbs and they sell quickly. Why is that? If distance is an issue why are they selling? While some investors are convinced by historical returns more and more are questioning the old standards. Continual development and construction of apartments, which nobody wants, will challenge established thinking.
Will we end up with vast areas of vacant apartments filling the suburbs around the CBD as people gravitate to the types of properties that they really want?
Investors should keep something in mind. The key to successful investing is to attract the largest pool of tenants. If these people are searching for house and land wouldn’t it make sense to offer that product to them? The fringe suburbs of today will not be the fringe suburbs of tomorrow. Heidelberg and Chadstone were all fringe suburbs in their day. Are they still fringe suburbs now? I think not.
I invite you to take a far reaching view and select your next property based on what people want rather than what is being offered by large developers. If you understand that property is a long term investment that you should never sell then you will ultimately come to the conclusion that house and land in today’s fringe is really the investment of choice.
Distance really doesn’t come into it.