Episode Details

Did you make New Year's resolutions for 2021? What were they? Were you planning to get more money? Become healthier?

How many have you broken already?

My resolution of eating more healthily didn't last long. But I know that a lot of people are planning to make 2021 a great year considering the challenges and how many opportunities were lost in 2020.

So, in today's episode, I've got two segments to help you if you're interested in property investment.

The main segment is a long, detailed discussion about gentrification.

You see…If you understand how gentrification works and what to look for, you can consistently outperform the market with your investments because of the cycle of the suburb.

Then in my mindset message, I'm going to ask you where you're going to be in ten years' time. Because wherever it is, you're surely going to be there. But are you deciding how you're going to get there and if you're doing the right things to get to the right spot?

Gentrification and the cycle of the suburb

Gentrification represents a powerful opportunity to increase both your property returns in the short term, and your overall real estate wealth in the long term.

There is no such thing as one property market in Australia – instead, there are multiple property markets, each with their own specific drivers and fundamentals.

While each state has its own property cycle, suburbs have their own cycles as well.

These suburbs are "gentrifying" – which means that they are going through a period of improvement.

In general, capital growth in these areas will outperform the averages.

These areas go from and ugly ducklings to a beautiful swan and therefore the homes in these suburbs increase in capital value faster than the average.

As a property investor, if you can identify an area at the earlier stages of gentrification and buy while prices are more affordable – you stand to benefit from ongoing capital growth.

What caused this gentrification?

One of the main factors behind this revitalisation was the exodus of manufacturing to the suburbs, driven in part by cheaper transport and better roads.

At the same time, many migrant workers departed to the suburbs to live in detached houses with front and back yards.

Interestingly at around the same time, our society started to experience higher education levels, which necessitated more people being closer to campuses.

These were usually in or near the CBD, and so being close to the city became more desirable.

The diversity of serviced-based jobs located in the CBD, together with the increasing number of women in the workforce and declining household sizes, all made the prospect of living in those smaller properties near the city more attractive to a larger cohort of potential buyers and renters.

Gentrification is a change in the fortunes of a suburb as it is discovered by a higher income demographic, which slowly pushes out the lower-income residents.

This usually occurs where working-class people, tenants and migrants move out as the land becomes too valuable and more affluent people move in renovating the old homes and improving the surrounding shops.

These new, more affluent residents invest time and money improving their new neighbourhood, pushing up prices and rents.

So how do you spot a suburb that is in the process of going through this metamorphosis?

One unusual and unexpected property research strategy to help in this regard might be through look at the dogs walking around the neighbourhood.

Yes, you read that correctly – I am suggesting that you look to the dog breeds for a sneaky clue!

To make things clear: just because a suburb has cheap properties, that doesn't mean it's destined to become the next growth area.

Some suburbs are inexpensive for a reason and won't improve because of various socio-econo