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Ben Kingsley Blog post by Ben Kingsley

What Will Be The ‘Highly Prized’ Property in 20 to 40 Years From Now?

The data is in for the last 40 years and it seems clear who the winners in Australia’s biggest cities of Sydney, Melbourne and Brisbane are; if you invested your money in the inner city fringe suburbs compared to buying in new estates you would have more than likely doubled and in a lot of cases tripled your money compared to returns from buying in a new estate area. So in some cases your $12,000 – $15,000 in 1974 could be worth well above $1 million dollars in the right locations and the right property, compared to some areas where putting the same amount back in 1974 has only netted you a current valuation of around $350,000.

It’s true that the better your ability or skill to know the changes that occurred over this long term period the significantly wealthier you are now or could have been. Some did it through luck while others worked out what big changes were going to take place over these years.

The biggest trend over this time was the change in the way the mass working centre (CBD) moved from a ghost town of the 70’s and early 80’s into a place where people wanted to be on weekends. But interestingly, this didn’t correlate to inner city apartment prices outperforming the market. Australians on the whole didn’t initially take well to the idea of hotel style living that comes with high density living. Instead, the areas that people decided they wanted to live and enjoy were the city fringe localities that offered great lifestyle amenity plus quick mobility between the office and work, as our major cities expanded to become serious size cities on a world scale. Those who bought houses, terraces, semis and got a bit of their own dirt with their buy are the property millionaires today, as the scarcity of fully utilised land became a very valuable asset indeed.

 

So the question is – what does the next 20 – 40 years look like from a residential property investment perspective – what will be ‘blue chip’?

Will today’s blue chip, still be blue chip in the next 4 decades? Let me get my crystal ball and give you some of my thoughts.

Population growth is going to be the absolute biggest part of our next 40 years. I certainly believe we will move to a population in excess of 35 million people by 2050. We are a very attractive country for those looking to migrate and the world wants in.

Also being part of Asia, we will see our mix of nationalities move to a greater Asian and sub-continent based population and these nationalities are very much used to mega cities with high density living arrangements. So the real question here is will they adopt our property interest on securing their own ‘Castle’ as in the great aussie comedy sense or through greater weight of numbers, will they demand more inner city apartment living and city fringe living?

what-would-be-the-highly-prized-property- Ben Kingsley MelbourneAs you dig deeper into this, try to imagine what do they think about our Edwardian and Victorian period properties? Are they more interested in new and contemporary house instead? Will this see a move away from the current blue chip style properties that carry so much ‘emotional value’ for the current Anglo-Saxon population base? Will apartment take over houses as the preferred style of shelter during this period?

As a property analyst and advisor, I spend a lot of time thinking about this because when I design a property investment strategy for a client, I’ve got to be very mindful of the medium and longer term outlooks and not just what’s going to happen in the next 10 years, because great investment property can make huge value gains over these extended periods.

And here is where my view is at on this matter…..

Australia is a very young country in world terms and seeing how other countries have evolved their great cities is, in my opinion, a very valid exercise as we can learn from their trends over time. Most big cities around the planet have similar human characteristics when in capitalist societies. Status, success, influence, money and wealth, financial freedom, are all important to many of the people in these cities and true to this belief, they tend to ‘tribe up’ in wealth pockets which are also areas that have quick access to mass employment centres (CBD’s again!). Furthermore in these big world cities, there is definitely an acceptance to apartment or condo style living, simply driven by lack of land mass and those looking for large incomes, needing to be close to their workplaces.

So I do see a slow, but steady acceptance of more people considering apartment living to the alternative of living further out in what they would consider ‘boring suburbia’. This will be the result of sheer population and congestion that comes from large cities and people being more time poor but still wanting all the lifestyle elements a big thriving city offers.

This is good news for those holding apartments close to town, especially those in small developments as consumers will still pay a premium for some privacy where they can get it. And it’s along these lines that makes me think that the ultimate winners are going to be those who have free-standing property close to town. Even though smartly purchased apartments are going to do well, free-standing houses and properties are going to become rarer and rarer over time as more land gets greater density development on it around the city fringe. These locations where a large amount of housing stock is free-standing will be ‘prized’ real estate and in my humble view will come at a premium over the decades ahead.

So the right location and land will still rule the property value equation for the next 20 to 40 years.

Remember, Knowledge is empowering, if you act on it.

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