Seven key trends to emerge in 2014’s property market: Secret Agent
This year is set to see some interesting trends emerge, from changing floor plans to investors and home buyers pursuing different types of stock, according to Secret Agent’s Paul Osborne.
Here are the seven key trends that Osborne is predicting for the property market.
1) China is where our future lies
Osborne notes that the future of Australia, and the property market, is less in the emergence of America and Europe but in the success of the Asia Pacific region. He particularly notes that China is one to watch.
"Hot money from Asia seeping into our assets, especially into our capital cities, is likely to increase over the coming years," he said.
"This will have profound implications on real estate prices for the remainder of the decade.
"Foreign investment is having a changing impact on previous fundamentals.”
The expectation: This year is set to see another surge in Asian investment, as these offshore buyers look for yield and capital protection. The CBD commercial markets in Melbourne and Sydney will see further price records overturned, with local buyers to be outmatched by foreign interests.
You might also want to read Juwai.com Andrew Taylor's editorial about how Australia is embracing Chinese investment in real estate.
2) Density to increase
The changing shape of urbanisation is also on Osborne’s radar as a trend to take note of, particularly as it is irreversible.
With 89% of Australia’s population currently urbanised and the number steadily increasing, suburbia is in decline.
"The Australian dream of a freestanding home, with lawn to mow, is leaving the consciousness of many Australians. Lack of infrastructure, transport, and culture, have made many resist the move to outer suburbia. Instead [they are] opting to live in smaller residences and even rent," he explained.
The push is driven by all demographics, apart from some of Generation X.
“The district of the City of Melbourne which comprises of Melbourne CBD, Carlton, Docklands, East Melbourne, Kensington, Flemington, North Melbourne, Parkville, Port Melbourne, Southbank, South Yarra and West Melbourne; only have a combined population of just over 100,000 people, within these most convenient locations. This geographical area is two thirds the size of Manhattan with just a fraction of the people,” he said.
The expectation: More people will opt for the convenience and the low-maintenance attraction of city living, with the bare minimum being downsizers choosing to live in the amenity/proximity rich areas within their own suburb to start with. The apartment preference will continue.
This news article has a look at a call from the Urban Taskforce into increasing diversity in housing supply densities.
3) New apartment buildings to see their ‘best days’
With city towers increasing in a number of cities, Osborne warns that the main issue is that many of these apartments are not suited to the local demographics.
Similarly, warehouse living has been a property type that has gathered momentum and buyer interest over the past few years, particularly in the edgier locations.
"Making the best of vertical space is seeing many storage and mezzanine levels being installed into these homes," he said.
The expectation: New apartment buildings are expected to see better days, providing they can up their game in terms of providing the right floorplans. He points to aesthetics, position, quality and larger floor plates as the important aspects.
Here, Houseplanology's Sam Crothers explains what it takes to create a good floorplan.
4) Household formation changing dramatically
Solo living, less children per couple, and higher divorce and separation rates are already resulting in fewer people per household, he said.
The demand for a lower number of bedrooms per home, with higher demand for larger rooms, such as living spaces and bedrooms, is already in place.
"Local preferences for housing stock will still gravitate around the existing group of period stock. Yet, awareness of the heavy upkeep and renovation costs are becoming more widely known, and this is increasing demand for contemporary property. We also note increased interest in the post war brick veneer within city fringe positions due to their solid structures and more accommodating floor plans," he explained.
The expectation: An increase in demand within the CBD’s fringe suburbs and the CBD. Apartments are to become the default option as houses become out of reach for many.
Houshold formation was one of a number crucial points in this head-to-head about housing supply between BIS Shrapnel's Angie Zigomanis and Michael Matusik.
See over page for his final three forecasted trends
More forecasts
5) The availability and cost of credit
Inexpensive credit is fuelling credit growth in certain sectors, while others show signs of deleveraging, he said.
"Australia’s headwinds include deleveraging and reduced foreign investment if Asian economies start to falter. If this were to happen simultaneously it would lead to falling prices," Osborne noted.
The market is currently splintered, with inner city areas having lower debt residents, and outer areas holding down more vulnerable jobs with higher debt.
The expectation: An increasingly pronounced split between the "haves" and the "have-nots", with credit being the amplifier in the system.
Observer Catherine Cashmore looked at the widening gap between the "haves" and "have nots" in this piece about housing policy reform.
6) Local investment to grow in SMSFs and yield to become the focus
Local investments have seen strong interest in SMSFs over the past few years, with investors increasingly pursuing yield.
"Leased assets within the residential and commercial property market have been hotly contested as bank interest continues to disappoint," he said.
The expectation: In the long-term, these investments should slow with interest rate increases and political pressure likely to begin restricting super funds from buying property.
The average borrowing of an SMSF is now at $357,000, according to the SMSF Professionals' Association of Australia, who claim that it isn't irresponsible.
7) Commercial market demand shifting to vibrant spaces
The type of space wanted by tenants and owner occupiers in the commercial market has already undergone several shifts.
With many office buildings currently needing a complete refit to meet the current working environment, especially with its growth as a retention tool, there have been many efforts to relocated to more vibrant locations.
Similarly, more workplaces are becoming mobile, with hotdesking becoming common as work forces are increasingly flexible."Natural light, break out areas and spaces that allow for greater collaborations have become vital for the modern corporation," he said.
The expectation: Funky well-located office spaces, such as converted warehouses, to become the sought-after stock.
We had a walkthrough of one of the latest innovative office spaces in Melbourne, 171 Collins Street.