What makes real estate so valuable - 1

We live in a country with vast expanses of space, yet we cling to the major coastal cities for dear life and treat the inner-ring suburbs of Sydney, Melbourne and Brisbane like hallowed turf that we can only hope to be worthy of residing on.

Property taps into some of our strongest needs and desires – security, safety, prestige, status, a sense of success, something to leave behind for our children.

We all need somewhere to live, or somewhere to operate a business, and as with any asset, when demand outstrips supply, prices go up – as we’ve clearly seen over the past few months.

Having said this, there are a number of key factors that will always play a part in the value of a property, in the most buoyant or subdued of markets.

So let’s take a look at why some properties are more valuable than others…

Where we want to live

Prior to Covid Australia’s population grew by around 1.4 percent a year – we were adding the equivalent of one new Darwin every 20 weeks or a new Tasmania has to be squeezed in somewhere every 18 months.

Sure population growth has stopped at present, but once the borders reopen and the government allows immigrants back into the country to help bolster our economy, it’s likely that her population growth is going to surge once again.

And it is likely that the bulk of the new immigrants will come where the jobs are – to Melbourne Sydney and Brisbane making a property more valuable there.

But there’s another significant trend that will make some properties much more valuable than others.

The fact is that in the new Coronavirus normal world the ability to work, live, and play all within 20 minutes’ reach is the new gold standard desirable lifestyle.

People love the thought that most of the things needed for a good life are within a 20-minute public transport trip, bike ride, or walk from home.

Things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs.

Many inner suburbs of Australia’s capital cities and parts of their middle suburbs already meet a 20-minute neighborhood test.

However very few of the outer suburbs would do so.

So properties in aspirational lifestyle locations or in gentrifying suburbs will be more in demand and more valuable moving forward.

The bottom line:

Like most things in life – supply and demand for a property determine its value.

And in the future, Australia’s population growth, our increasing wealth as a nation, and our desire to live in a select number of locations in our big capital cities will underpin the future value of well-located properties.

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Jason Gwerder
Thursday, 13 May 2021

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