Some things never change; inner city investment is the best bet: Gavin McPherson
For well over a decade I have been grappling with property markets consistently showing us the increased performance of concentrated inner urban areas, particularly those that are in a close proximity to the CBDs of our major Australian cities.
But there’s really no point fighting against it. The fact is, CBDs are the highest performing areas, and that makes them the key areas for investors.
When looking at investing in your first, second or hundredth property, the location is always the most important factor to take into account, and there’s always going to be an element of risk when making that decision. The whole notion of investing applies an assessment of risk, but I would argue that that risk is mitigated by investing in areas which have robust employment, infrastructure and lifestyle choices.
Mining towns may seem like the prime area to make a profit, but there’s no promise that these areas will still be populated and have a reliable stream of tenants in 10 or 15 years’ time. But in our inner cities, you know that this will always be the case – and that’s a fact!
The buyer’s agents in my business specifically look for properties within a five-10 kilometres perimeter of the CBD. The reason for this? People will always cluster where trade and commerce present themselves.
Cities form around landscape and natural bounties such as beautiful harbours and inlets, they’re nice places to live and people are social and community-based creatures - they relish in living near the action. In fact, the old cities around the world show how communities of all racial, cultural and religious backgrounds thrive in these cities.
This very phenomenon has been played out across the world, city after city, on every single continent in the world and is our key to success. It is your guarantee that we too will populate our cities in exactly the same way as places like London, New York and Shanghai.
The land in capital cities will always be an asset that will grow in demand.
At present, I stick to the top six cities in Australia in order of population:
1). Sydney
2). Melbourne
3). Brisbane
4). Perth
5). Adelaide
6). Gold Coast
I usually recommend heading for Sydney or Melbourne to consolidate the core purchasing strategy. Australia is now one of the most urbanised countries in the world, with 89% of our population living in urban centres and investing in these areas will almost definitely offer you the most upside to your 10–15 year plan.
Go where the land is scarce and, once you’ve decided on your area, ask yourself the following questions before purchasing.
a). Where is the employment centre of the city?
b). Is there a diversity of employment in this region?
c.) What is the history of this employment, i.e. does it ebb and flow or is it historically always strong?
d). Can I buy close to good infrastructure, or if the citizens of a city are better serviced elsewhere, what is stopping them from leaving?
e). What is the history of infrastructure in this city? I.e. how has the government [state and local] achieved the objectives set by its citizens over a good (minimum 15 years) period of time?
Once you know these answers, you’ll know if you’re in an area that will grow and thrive – and your property will grow and thrive with it. A safe bet for anyone entering, or well experienced, in property investing.
Gavin McPherson is the CEO of Oasis Property and author of "Value Investing in Property: What would Warren Buffet do if he was investing in property in Australia?"