Property investment strategies – How to choose locations and styles for long term

Key Points for Capital Gain in Long Term

* Buy property in the middle suburbs close to public transport corridors, shops and schools.

* Buy low-maintenance, compact dwellings because of the shrinking family unit.

Most property investors see the residential property investment is a long-term proposition because the property price takes about 7 to 10 years to double. Despite this, many property investors choose locations and property styles with little potential to make a good capital gain in the long term by failing to consider the long-term economic and demographic trends, according to a article on by Mark Armstrong, an independent property analyst and adviser.

Some investors choose locations that lack the long-term underlying demand to drive capital growth, while others choose property styles that don’t reflect trends in the way people want to live.

In other words, the property investment decisions that look good today may not prove so attractive in five, 10 or 20 years. It’s essential to understand the nature of long-term economic and demographic trends, then select assets accordingly.

Interest rates rise and fall, but in the long term, dwindling oil reserves and rising petrol prices will be a key economic trend influencing the property market. In the coming years, rising prices at the pump will make outer suburban living and commuting less feasible and less appealing.

This will curtail the urban sprawl and increase demand among home buyers for property in the middle suburbs close to public transport corridors, shops and schools.

At the same time, rising property prices in the inner and middle suburbs will put home ownership beyond the reach of more Australians, or at the very least, delay it significantly.

Figures from the Bureau of Statistics tell us that the proportion of households renting from private landlords increased from 19 to 22 per cent in the 10 years to 2006 (when the last census was completed).

What’s more, the proportion of Australians aged 35 to 44 who were renting rose five percentage points over the same period, to sit at 32 per cent. There’s every reason to expect that this trend will continue.

Because many tenants want to maintain the trappings of an urban lifestyle, the trend away from home ownership will increase demand for rental properties within walking or short driving distance from trams, trains, shops, cafes and entertainment. This will further boost capital growth prospects in the inner and middle suburbs.

Delaying having children is another trend set to influence the residential market well into the future. The median age for parents is growing, at 30.8 for women and 33.1 for men. And women aged 40 to 44 (said to have completed their families) have an average of two children, compared with 2.8 in 1981.

The shrinking family unit means that demand for low-maintenance, compact dwellings will rise, while demand for the conventional sprawling home on an outer suburban block will fall.

When you look at all these trends in their entirety, it’s clear that pockets of the middle suburbs with large blocks on land close to public transport, shops and schools will provide feasible long-term opportunities for residential property investment, particularly for investors who have been priced out of the tightly held inner suburbs.

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