One of the major changes in the way Australians live over recent decades is the gentrification of our suburbs.
What is gentrification?
Gentrification is the changing character of a neighbourhood through the influx of wealthier residents and businesses into once lower-income areas.
It is one of the most significant changes to occur in Australian cities and other cities across the world.
This process typically leads to property values being pressured upwards.
Research conducted by the University of Queensland reveals that the middle-ring, 5-15kms from Brisbane, Melbourne and Sydney CBDs are all experiencing the highest levels of gentrification [1].
Suburbs in these cities seem to be either gentrified already or rapidly gentrifying, while the inner-city suburbs (0-5km ring) of Sydney, Melbourne, and Brisbane—now typically affluent areas—are not seeing a change.
University of Queensland Senior Lecturer in Urban Planning, Dr. Dorina Pojani says the findings are surprising, contradicting earlier urban geography theories placing gentrification as an “inner-city phenomenon”.
Pojani states:
“Instead, the highest levels of urban renewal are occurring within a band located 5-to-15 kilometres from the cities’ central business districts."
What Does This Mean For Property Investors?
As property investors, we are on one side of the fence – as gentrification increases values.
On the other side of the argument supply of affordable housing available to existing lower-income residents is reduced.
As Boucher put it:
“Lower-income residents are then also denied the benefits of economic growth and the increased availability of services that come with greater investment in these changing areas.”
Market Under Spotlight: Sydney
The research shows that the Sydney areas seeing gentrification include Ryde, which is 13 kilometres north-west of the CBD and suburbs south of the CBD including Campsie, Dulwich Hill, Marrickville, Sydenham, and Mascot:
Market Under Spotlight: Melbourne
While Melbourne suburbs are experiencing the quickest gentrification in the North, North/West, and West within the middle ring. The already established and affluent South/East, experiencing less gentrification.
The study found that the “new middle class”, which has traditionally been associated with inner-city gentrification, is unable to access the housing market in these already “gentrified suburbs”, and as a result are moving outwards.
Market Under Spotlight: Brisbane
Brisbane is home to a ring of gentrification suburbs within the 5-to-15 kilometre radius, including Mitchelton, Enoggera, Stafford, and Chermside on Brisbane's northside.
Brisbane suburbs to the south of the CBD include Murrarie, Cannon Hill, Carina, Woolloongabba, Corinda, Fairfield-Dutton Park, Salisbury, Annerley, and Moorooka.
Key Takeaways
University of Queensland research included demographic metrics such as increasing household incomes, education, home-ownership and white-collar occupations as well as decreasing age and growing population density from 2006 to 2016.
Gentrification will typically have a ‘ripple effect’.
Property investors will see high success and price growth by correctly identifying markets that benefit from improving demographics like increasing incomes and lower unemployment. This can lead to an improvement in lifestyle infrastructure like cafés, schooling and restaurants; which will then generate further improving demographics.
It is like a self-fulfilling prophecy cycle, which drives property price growth – the cap or end to the cycle is affordability limit being reached for the market.
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Adam Duffy - Partner at Meridian Australia
P: (02) 9939 3249
References
[1] University of Queensland
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