16 Feb 5 Reasons why Apartment Living will become the new norm – Michael Yardney
In today’s show Michael Yardney, from Metropole Property Strategists, gives us the 5 reasons why apartment living will become the new norm.
Kevin: One of the key things that we learn about property investment is that you have to keep up with those changing trends. It’s interesting; in some discussions that I’ve been having with Michael Yardney – who’ll join me in just a moment – from Metropole Property Strategists, demographics is playing a key factor in helping you to determine where you should be investing your property dollars.
Michael, thank you for your time. This is an interesting insight as to where the market is going. I know that you’ve assembled some thoughts on why apartment living may just become the norm.
Michael: Kevin, I believe that demographics – how we live, where we are going to live, how we want to live, how many of us there are – is going to be a more important factor shaping the future of our property markets than the short-term ups and downs of supply and demand or interest rates or government factors. And that’s why I agree with you; I think understanding Australia’s lifestyle and demographic trends is what all investors should be studying.
Kevin: Maybe you could take us through a quick look at some of the interesting Australian demographic trends and their implications, Michael.
Michael: Kevin, these are quoted in the Intergenerational Report that the Australian Bureau of Statistics has brought out. Other demographers are doing a lot of study because it doesn’t only affect property, but it affects planning, it affects commerce, it affects governments.
They’ve shown a couple of trends. One is our population is aging. Our baby boomers are becoming empty nesters and their lifestyles are changing. More are getting ready to retire, Kevin.
But remember years ago, they talked about tree change and sea change. That’s not happening, is it, Kevin?
Kevin: No, not at all, Michael.
Michael: No. People are wanting to retire close to where they live now. They still want to go to the same hairdressers, the same dentist, be where their friends are. So, one of the big trends is our population is aging.
I think the other one is that it’s changing. The average number of people living in each household is decreasing. There are more lone people households, couples without children, and single-parent households.
I think both the trends we just discussed a second ago mean there’s less demand for those sprawling properties with four bedrooms and probably more demand for medium-density properties, Kevin.
Kevin: Yes. Of course, in tandem with that, too, our population is growing, Michael.
Michael: Yes, it is. Our population is currently just under 24 million people, and even though population growth is slowing, it’s estimated our population is going to increase to 28 million people in ten years’ time, so we’re going to get another four million people, Kevin.
Close to four out of five of these people, though – just over 3.2 million people – are expected to live in our capital cities. They’re going where the jobs are, and more of them are going to go to Melbourne than anywhere else. The Bureau of Statistics thinks that 925,000 people will move to Melbourne, 820,000 to Sydney, 710,000 to Perth, and 530,000 in Brisbane.
But, Kevin, if you look at that, it means we’re going to need 1.7 million new dwellings to house those people, and think about all the extra cars on the road and the infrastructure and the shopping centers and the schools and the crèches. It means that we’re going to need maybe different sorts of dwellings, but it really underpins our economy and our property markets, Kevin.
Kevin: Yes, and of course, with the increased prices in Sydney and Melbourne in particular and those figures you were just talking about, the number of people who will be living in those capital cities, making it even more difficult for first-home buyers.
Michael: Kevin, I think we’re going to follow the trend of a lot of overseas countries, where in the very big capital cities, it is going to become harder and harder for first-home buyers – particularly if they want to buy a house, particularly if they want land around them, so more are going to turn to apartments. I think the trend that we’ve seen in the last years of becoming renting investors – in other words, renting where they choose but can’t afford to buy and buying an apartment as an investor – I think that trend is going to continue, Kevin.
Kevin: Of course, too, Michael, we’ve seen yours and my generation; looking at the current generation, their preferences have changed a lot.
Michael: Yes, they have. I think we did want to have a house and land and different areas and live in different places to where our parents did, but I think for the younger generation, there’s an increasing trend of people wanting to live in the city. In our days, no one wanted to live in the city. All they want is to live close to the CBD.
When we grew up, Kevin, they were more the working-class areas and the poorer areas and the industrial areas. The younger generations want to be closer to their work, closer to their social life, attractions, and they’re actually quite happy swapping backyards for balconies, living in apartments.
Kevin: Yes, and of course, some of those areas have become gentrified, too, Michael, haven’t they?
Michael: Very much so, haven’t they? What do they call this? The hipster generation, as well?
Kevin: Yes, exactly. So, what’s the bottom line?
Michael: Well, I think these demographic trends are important. They have important implications. I believe while more of us are still going to want to live in houses in the outer suburbs, a bigger percentage of Australians are going to live in apartments. They’re going to become more popular.
We’re going to have to build the right apartments. I think we’re building too many of the wrong small apartments. There’s a huge demand from baby boomers for reasonably substantial apartments that are lock-and-leave apartments where they can go off and do their things, but not the tiny poky ones. I think even the younger generations are going to want things with a little bit more space, a little bit more amenity.
I believe in the future, the properties that will increase in value are those that more people are going to want. If you can own them, you’re going to be a good investor.
Kevin: There you go. Five very sound reasons why apartment living is going to become the new norm. Michael Yardney has been my guest from Metropole Property Strategists.
Michael, thanks for your time.
Michael: My pleasure, Kevin.