New research released by the Property Investment Professionals of Australia has revealed the next city suburbs around Australia set to “gentrify”.
Research undertaken by PIPA chairman Peter Koulizos has uncovered particular signs that could help homebuyers and investors pick the next booming suburbs.
Inevitably, a suburb will often gentrify due to its proximity to the CBD, picturesque views or seaside location, but there are a number of other factors that can help accelerate the process.
“If you had this knowledge a few decades ago, you would have bought in suburbs such as Balmain and Paddington in Sydney before they became highly sought-after and expensive,” Koulizos said.
“Likewise, in Melbourne, where you would have invested in Richmond or Collingwood before they became really popular and pricey.”
Gentrification is occurring rapidly in capital cities across Australia and savvy real estate investors are making the most of the potential price upswing.
The research tested 20 different demographic and property factors to determine if any were early indicators of gentrification.
The research included data from overseas, which uncovered four demographic factors that helped to identify areas in the early stages of gentrification.
PIPA’s four demographic factors for gentrification
- A greater decrease than the state average in people aged 18 years and under.
- A greater increase than the state average in couples without children.
- A greater increase than the state average in people that lived at a different address five years ago.
- A greater increase in the percentage of women working in professional occupations.
While traditional indicators such as good schools, high rental yields and low unemployment are often telltale signs of an improving neighbourhood, Koulizos’s findings are drawn from examining deeper social fabrics and demographics.
For example, the research found that fewer children in a suburb, as well as a higher number of couples were early indicators of gentrification as young people moved into inner suburbs close to universities and employment hubs.
“They can’t afford to live in the ritzy eastern suburbs of Sydney, Melbourne or Adelaide so they target the more affordable and gentrifying inner western suburbs of these cities,” Koulizos said.
The changing of the guard in a suburb was also an early sign of gentrification, as an increasing number of “new” residents moved in.
“It is often the case that before an area gentrifies it is full of older people who are still living in the houses they bought 50 years ago,” he said.
“As many of them are now on fixed incomes or pensions, they can’t afford to make substantial improvements to their homes, so, in move the younger people.”
Suburbs with character and period-style buildings in low-income areas are often highly sought after by young professionals looking to update and live in.
“Many of them work in professional jobs in the city, on relatively high incomes, no dependents and have a high disposable income and borrowing capacity so they have the ability to upgrade the period and character homes.”
“The final early indicator of suburb gentrification was a higher percentage of women working in professional occupations who often didn’t have children, or indeed a partner, but who had the funds to buy and renovate, upgrade or develop homes in the area.”
There are countless examples of areas around the country that have changed from dreary to in-demand, such as Balmain in Sydney, Richmond in Melbourne or Teneriffe in Brisbane.
“Identifying areas undergoing the early stages of gentrification is just one way that property investors can get above average returns on their assets,” Koulizos said.
“The secret is to get in early before everyone else realises what is going on.”
Research, The Urban Developer, 18 June 2018