Expert Interviews with Kevin Turner. 06/08/2018
New research released by the Property Investment Professionals of Australia has revealed the next city suburbs set to gentrify. Some of the hottest suburbs in Australia’s capital cities today are the ones gentrified over the last decade or two. Peter Koulizos from PIPA lists them for us.
Listen to the interview now:
Kevin: As a property investor, you only have to look at different parts of Australia where gentrification has actually occurred to what the reaction is going to be, what the ramifications will be, and how that looks from an investment portfolio basis.
There’s some new research that’s just been released by the Property Investment Professionals of Australia, PIPA, an organization we strongly support, that’s revealed the next group of city suburbs that are set to gentrify. PIPA’s chairman, Peter Koulizos, joins me to talk about that.
Hi, Peter. How are you doing?
Peter: Very good. Thank you, Kevin.
Kevin: This is such an interesting story, isn’t it? Gentrification is something that I only started to hear about 10 or 15 years ago. It’s been going on for generations, hasn’t it?
Peter: It has, yes. It was coined as gentrification back in the U.K. many decades ago – back in the 1960s, actually – when they started to see the gentry moving into older, down-and-out areas. And that’s also been happening in the U.S. where wealthier people are moving into the inner-city areas, and obviously in Australia.
Yes. There are many parts around the world where gentrification occurs – basically, people moving into areas that were regarded as blue collar, not very desirable to live in, but because of its proximity to the city or the sea, and very importantly, the historical buildings there, it attracts a lot of people.
Kevin: It’s all about lifestyle, isn’t it? If we look at the ones that have been gentrified recently that we’ve talked about, they are all close into the city, they are carrying older-style homes, which brings about a certain amount of romance too, I suppose, doesn’t it?
Peter: It does. And Australians love older property. The older, the better. It’s not uncommon for a 120-year-old house to sell for more than a 20-year-old house, everything else being the same. And from an economics point of view, it makes sense, because they’re not making any more original Queenslander style homes or Federation or Edwardian style homes.
Kevin: I’m going to ask you about the suburbs in just a moment, but the 20 different demographics that you dug into to get this research, tell me about that, just so that we know a little bit more about the research.
Peter: Sure. I did some academic research a little while ago, and I compared two suburbs that are next-door to each other in my hometown of Adelaide. I compared a suburb called Torrensville, and right next door to it is one called Brooklyn Park.
Just to give you an idea, Torrensville is similar to, say, Yarraville in Melbourne or Erskineville in Sydney. It’s only three kilometers from the city and full of character or period style homes, whereas Brooklyn Park – which is just next door – was really developed after World War II and full of 1960s’ homes.
I was looking for differences in demographic data, property data to try to determine if there are things that can be easily measured to help determine whether an area is going to gentrify or not. And as you said, I looked at about 20 different factors.
They included houses versus units, the size of the land, whether there was a big change in the people who moved into the area, was there an ethnic background to it, was it based on married people? So, lots of different demographic factors.
But in the end, I came up with four that seem to be fairly reliable in helping to determine whether an area is in the early stages of gentrification.
Kevin: Great. Let’s run through those quickly. What are they?
Peter: The first one was a greater decrease than the state average in people aged 18 years and under. In other words, a gentrifying area will have less children.
A greater increase than the state average in couples without children. Those two are very closely tied.
A greater increase than the state average in people who lived at a different address five years ago. What this is telling me is that for gentrification to occur, you need different people moving into the area.
Typically, what you’ll have is in these areas, there will be people who moved in 40 or 50 years ago and are now in their 70s and 80s and don’t have the money nor the borrowing capacity nor the skills nor the energy to fix up their homes. So, as they leave the area, then younger people, white-collar people, professionals move in. They have the money, they have the borrowing capacity, and they have the knowledge and the skills – or they can access people with that knowledge and skills – to fix up their properties.
Another very surprising factor for me was a greater increase in the percentage of females working in professional occupations. It wasn’t just anyone working in professional occupations. In particular, if you can detect an increase in the number of females who work in professional occupations such as managers, teachers, executives, architects, and so on, that is one of the indicators to help determine whether an area is in the early stages of gentrification.
Kevin: That last point you just made is really interesting, because females bring a certain amount of – how can I say this, Peter – class to an area. Maybe they’re a little bit more demanding about the style of restaurants that they’ll go to, the shops that they go to, and so on, but also working in professional occupations, they have a higher disposable income.
Peter: Yes, that’s right. And if you’re on your own with no dependents, whether you’re male or female, you have a higher disposable income. And if you’re a gay couple, generally only a few gay couples tend to have children, so you have a higher disposable income because there aren’t children in the household.
So, with a higher disposable income, you can spend more money on different things, including extending and renovating that character or period style home.
Kevin: Of course, any investor is really looking for these areas we’re talking about here so that they can improve the return on their asset. But I guess the secret is actually getting in there early. Because some of these signs we’re talking about, it may have already gone, what would you say would be one of the early signs that a suburb may be starting to gentrify?
Peter: Something I didn’t write in this particular article but I have read and spoken to other academics about is the movement of the creative class into an area – so artists, crafty people. Some of the physical signs you’ll see are little studios popping up in the suburb, and not necessarily on the main road but on the side streets. Maybe the electricity poles are painted. There might be a community garden with artwork. That’s a very early sign that things are happening.
But there’s no real fear of missing out, because the gentrification process can take 20 to 30 years. Places like Balmain and Paddington in Sydney didn’t come good overnight; they took decades to come good. Or places like Richmond in Melbourne or West End in Brisbane, they took a long time to come good.
You can try and guess which areas might gentrify, but I find that the safest thing is to look for the early indicators that it is already happening, you know you have 20 to 30 years in front of you to benefit from that, so you have a much safer bet by buying into the areas that are just showing some of these indicators.
Kevin: We’ve got a few seconds left, so let’s just quickly run through some of the suburbs that you have actually highlighted in Melbourne.
Peter: In Melbourne, Braybrook, Footscray, and West Footscray, all in inner western Melbourne.
Kevin: And Sydney?
Peter: Arncliffe, St. Peters, and Tempe.
Kevin: And Brisbane?
Peter: Annerley, Lutwyche, and Woolloongabba.
Kevin: And Adelaide?
Peter: Thebarton, West Croydon, and Hindmarsh.
Kevin: There you go. Okay, We’ll make sure that all of those suburbs will be listed for you underneath the commentary. Some great research and a really interesting story, Peter, so thank you for sharing it with us.
Peter Koulitzos is the chairman of PIPA, the Property Investment Professionals of Australia. Thank you very much for your time, Peter.
Peter: A pleasure. Thank you.
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Originally published as: https://realestatetalk.com.au/the-next-suburbs-to-gentrify-peter-koulizos/
Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.
He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.
He now hosts a real estate show on Radio 4BC and a weekly podcast at www.realestatetalk.com.au. He is the host of a daily 7 to 10 minute podcast show for real estate professionals at www.reuncut.com.au.
To hear more podcasts by Kevin Turner, click here
Disclaimer: while due care is taken, the viewpoints expressed by interviewees and/or contributors do not necessarily reflect the opinions of Your Investment Property.
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