Recently I was lucky enough to fly over some of Melbourne’s top suburbs in a helicopter. As you can imagine I was able to get a very different view of the real estate landscape than from what you might see on the ground. It also gave me the chance to test a theory I have had for some time about current property trends.
Across Australia for some time now, we have been seeing the average size of residential lots diminish at the same time that we are seeing the size of the average house being built grow larger than the historical average.
This trend is fairly easy to observe in new growth suburbs across all the major capital cities but I suspected the trend was a lot broader than that. I believed the trend was not just people seeking affordable land on which to build their dream home, but as a society at large we were moving away from a focus on big backyards and towards a more maintenance-free lifestyle.
What I mean by that is people seem to be doing their best to reduce the amount of work that they have to do outside their home. Yards and gardens are getting smaller and smaller, while what remains is more commonly than not heavily landscaped, so as not to create vast tracts of lawn which require fortnightly maintenance. People are choosing a few coffees and a long brunch with the family as the Sunday morning essential over a date with the Victa 4-stoke mower or some pruning shears. This trend would appear to be a direct response to the increasing demand on people’s time that is coming from their working lives. It is, to use that very popular term, an attempt to maintain a “balanced life”.
In fact, now that we have an in-house Property Management team we are finding we get direct feedback from prospective tenants telling us that as long as the house is within walking distance of a park then all they want out the back is somewhere for the BBQ and a couple of chairs. The choice is being made for a more simple life driven by a desire to spend time with the family rather than doing the garden.
Now this may have implications on what you buy or develop in the future. A big block may become a liability for you, if it is not filled with a very large house or can be sub-divided because the tenants or the buyers are increasingly preferring not to have too much to look after.
In fact the focus has very much moved from the size of the block to the built environment. These days if you have the same house on 300m² of land or 600 m² you can often find that they will sell for almost the same money. So where is the opportunity for investors in this new trend?
If you can secure approval to sub-divide a block and not touch the existing house you may find you get the extra block of land for almost nothing. In a new area you can buy a smaller block that will still fit the average family home on it and surround yourself with larger more expensive sites that people will just end up spending more money on to cover with an even bigger house. This can raise the value of your street and give you a better return.
So when I had the chance to fly over the suburbs I was looking at this trend in action. More of each suburban block was being covered with a house including a roofed-in alfresco dining area, and less of the land was going to outdoor space. Even in the best suburbs of Melbourne I could see that the once coveted lawns, formal gardens or even tennis courts were making way for more terraces, outdoor rooms and more “house.” The shift in the way people are choosing to live their lives was being reflected in what could be seen in the real estate from above
I believe this is a long term trend, that will not change overnight due to some fad. This is a seismic shift in the way we are all leading our lives now.
The effects of this trend will need to become part of your thinking when choosing your next investment property. The short term effects could include lower rents if you get it wrong by choosing a property with too much yard and garden area that screams “high maintenance,” leading to lower Tenant Demand. You could also find your long term capital improvement may not be as great due to subdued Buyer Demand for the same reasons.
Remember too, this trend may not only affect your new purchasing decisions. It will also affect all the properties in your portfolio, so you might need to look through them with some fresh eyes.
We at Investors Direct Property Advisory would be happy to sit with you and review your portfolio with this trend in mind. Please don’t hesitate to contact me by email at firstname.lastname@example.org
Until next month, happy investing