This is what will shape the future of our property markets

Infrastructure – it’s not a very sexy word, is it?

But the things is, building things to make our lives, and our economies, better will be even more vital in the years ahead.

That’s because our population is growing so fast that our cities are becoming increasingly congested – and no one likes being stuck in traffic for hours going nowhere fast.

Population explosionpopulation growth

Since the GFC specifically, Sydney and Melbourne’s populations have ballooned.

Sydney is now home to five million people and Melbourne is not far behind on 4.6 million.

And the populations of both cities are expected to skyrocket over the next 40 years to hit an extraordinary eight million souls in each.

To put that in perspective, a population of eight million puts those cities on par with London.

And a city of that size will mean even more traffic congestion than what we have to endure today.

International economic strategy consultant AlphaBeta recently analysed the average commuting times for more than 1.4 million Sydneysiders based on where they live and work as well as their access to public transport. 

[Imported] WP Advertize it Free Strategy ad 10 July 2014 (Desktop #44800)

And the results are sobering to say the least…

Workers in the city’s southwest and northwest, on average, take up to 90 minutes to get from home to work on public­ transport, often travelling more than 30 kilometres on several­ modes of transport.

A lack of jobs close to home and poor transport links mean people in these areas can spend an average of three hours commuting – or the equivalent of 20 working weeks each year.

In fact, the federal infrastructure department recently found Sydneysiders commute on average­ longer than residents of large US cities, including New York and Chicago!

A car story

While there is a solid push for more infrastructure to deal with all these new people, the sad news is that it probably won’t be enough. Traffic jam

Infrastructure Australia, the body which plans for our future road and transport needs, says that a staggering 94 per cent of all vehicle passenger trips are currently being undertaken by motor vehicle, according to MacroPlan.

Even if all the rail and light rail projects on the table are completed, by 2035, 94 per cent of Australian vehicle trips will still be taken by motor vehicle.

The more things change…  the more they stay the same.

Research shows that most people are unwilling to commute more than 45 minutes each way to work so we are starting to see a divergent property market take shape.

Market divisions

According to MacroPlan, the residential property market is breaking itself into two distinct components, responding to two very different types of worker.

Professional jobs in the knowledge-based economy are clustering in the inner- and middle-ring suburbs. location map house suburb area find

And what that means is that the highly paid households who work in these sectors are living in these areas, too, and driving up property prices because they do.

On the other hand, in Sydney and parts of Melbourne, a completely different housing market on the outer fringes is emerging.  

The residents here work for more modest salaries which, even with career progression, will not increase significantly, so they have to buy dwellings that fit within their limited long-term budget.

In fact, MacroPlan analysis compiled over the past 10 years indicates that the rate of price and growth for inner- and middle-ring dwellings is between three and six times faster than fringe areas.

The bottom line…

It doesn’t take Einstein to work out what that will mean for property investment opportunities in the years ahead, does it?

Sophisticated investors will opt to buy in those inner- and middle-ring suburbs because they will continue to appeal to professional owner-occupiers who can afford to pay a premium to live there.

from Property UpdateProperty Update

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