Gentrification is
a process where a neighbourhood or an area is improved and redeveloped, leading
to an increase in property values and slow displacement of older long-term
residents due to rising housing costs.
This
process often starts with the influx of middle or upper-class residents, new
businesses, and amenities, which attract further investment and development.
It often
happens in inner to middle ring suburbs which were initially overlooked, but
have now become in higher demand as prices move out of reach in nearby suburbs.
You will
see tired old warehouses or run-down shops in surrounding streets, starting to
be given a new lease on life.
They may be
transformed into a trendy café, microbrewery, or maybe a new hairdresser or
bakery.
The
demographics also start to change as the older retirees or social housing
tenants start to move on and busy young professionals take their place.
As a
result, we also see the average income for the location shift up a gear as this
higher-income earning demographic moves in.
Gentrification
can happen on a street level too.
The new
demographic does not want to live in old, tired, run-down properties, so they
start to make changes.
They
renovate or knock down and rebuild to meet their appetite for a more
contemporary home and to match the ever-changing, trendier landscape while
developers transform the existing property into more modern and desirable
housing.
Gentrification
is a positive factor for property investment because it brings economic
benefits and improvements to an area which in turn creates more demand and
therefore attracts higher prices for local properties.
Moving
forward, we’re likely to experience a period of lower general capital growth,
so I would recommend investing in areas that are gentrifying.
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Jason Gwerder
Friday, 17 November 2023