Gentrification and the property market

WITH THE UFINANCIAL TEAM

Gentrification is a popular word in the property market. It is also a sensitive topic that involves many different stakeholders and perspectives.

Largely, gentrification is a process of urban development in which a lower-income neighbourhood develops rapidly, usually through the influx of wealthier residents and businesses.

Many believe gentrification to be a positive process. It can potentially bring much-needed investment into long-neglected areas, encourage property owners to improve housing, increase consumer purchasing power at local businesses and increase property values.

A recent example of suburb gentrification is Melbourne’s Footscray. In 2015 Footscray in Melbourne was ranked 74th suburb in Victoria. In 2020 the western suburb had climbed up to the sixth position.

On the other hand, that same process can potentially prevent low-income families from moving into previously affordable suburbs.

In 2017, Ink Coffee, a coffee chain in the US, received significant backlash on social media for displaying a sidewalk board that read ‘happily gentrifying the neighbourhood since 2014’.

Photos of the board spread on social media, causing outrage. Activists organised protests outside the store, and many committed to boycotting the chain.

A local resident claimed gentrification made it harder for her to operate her business due to rent being too expensive in the neighbourhood. And she was not alone.

The steady economic growth in the area forced much of the arts community out of their venues and, in many cases, their homes.

Gentrification could have positive and negative effects on communities. That’s why it’s vital that communities and councils keep an open dialogue to address the challenges and opportunities that arise with the process.

For a real estate investor, gentrification takes on a whole new meaning. Investing in gentrifying suburbs represents the opportunity for above-average returns in the short term and overall wealth in the long term.

Savvy property investors look for areas at the earlier stages of gentrification and buy while prices are still affordable.

Gentrification is easy to identify after it has taken place but forecasting a suburb that is about to undergo gentrification requires a lot of skill and experience.

Looking for suburbs with the best potential price growth is just part of the equation.

Finding the right investment property that aligns with your investing goals and needs is a whole different game.

It is a methodical process underpinned by a lot of research and rooted in a tried-and-proven investment strategy.

Location matters a lot, but it is not the only thing. Demographics, infrastructure, primary household structures, employment, population forecast, schools, budget, tenant appeal and rental yield are just some of the other things an investor needs to consider when assessing property options.

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