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In this story we examine four global trends and provide insights into potential opportunities in the Australian property market.
The global property market is constantly evolving, influenced by a myriad of factors, from economic conditions and geopolitical events to technological advancements and shifting demographic trends.
Around the world, urbanisation continues to drive the growth of mega-cities which is defined as populations over 10 million. An example of this can be seen in the surging growth of the African continent lead by a youthful demographic, where cities such as Kinshasa in the DRC growing rapidly from an initial 2.6 million residents in 1984, to currently 17 million, and with a projected mammoth 35 million by 2050.
Our very own mega city is emerging as Greater Sydney continues to expand to a projected 5.75 million by 2036 with a three-city plan of Harbour CBD, Parramatta and Penrith to become city hubs. Implications of this will see further density around these regions and ensuring infrastructure to meet this growth.
Environmental sustainability has become a significant consideration for property investors globally and, like it or not, it’s having a profound impact on the way we build and invest. Driven by both regulatory requirements and consumer preferences, the growth of ESG initiatives is driving top-down demand from organisations such as the World Green Building Council who are implementing policies to drive systematic change by addressing factors such as whole-life carbon emissions, and efficient infrastructure and now proponents of equitable measures as part of their greater focus.
In Australia, government commitment to achieve net-zero carbon will continue to impact the industry over the coming decade. Increasing build standards such as the 2024 BASIX update requiring thermal performance to now 7-stars, will reduce energy costs for tenants by up to $1070 p.a. but will additionally drive-up construction costs.
The integration of technology into real estate, now known as PropTech, is transforming the property investment landscape. Smart homes with adjusting mood lighting, IoT devices that detect falls from bed, and AI-driven property management increasing company efficiencies are just a taste of what’s to come, enhancing the tenant-experience.
On a mega-scale the Saudi Arabian Neom project is creating a city 170km long, 500m high and 200m called ‘The Line’. Think integrated rail transport below buildings, no roads, 5 minute walk to all amenities and integrated IoT which will house an expected 9 million people.
According to Statistica, it’s anticipated that by 2028, 11 million users in Australia will benefit from smart home devices. Home energy management systems will be AI enabled, monitoring use to adjust conditions such as reduce heating in rooms that are not occupied, creating savings and less pressure on the electrical grid.
7-stars will reduce energy costs for tenants by up to $1,070 p.a. but will increase construction costs.
It’s not just Australia, but many markets are grappling with housing affordability issues and their flow-on effects, such as in California which is seeing an increasing number of residents struggling to afford shelter and consequences of it which has included increasing rates of homelessness and mental health issues.
Typically, affordability has centred around subsidising private rentals, public housing and first-home grants. Rent control has been used in areas like New York but this has led to a reduced long-term investment by owners, ultimately affecting supply and quality.
Recent Australian affordability initiatives have included the institutionally backed Build-to-Rent sector, entering our major markets where developers, capital partners and property managers strike long-term partnerships to provide rental apartments, which also typically includes affordable components as part of their approval.
Another model, providing a novel solution is rent-to-buy where participants initially rent the property which assists with the build-up of a deposit and over an extended period converts to a traditional mortgage-ownership of their property, thereby sidestepping the barrier of saving a large deposit.
Global residential investment trends provide valuable insights for Australian property investors. By understanding and adapting to these trends, investors can better navigate the complexities of the property market and identify promising opportunities. As the world continues to change, staying informed about global developments will be key to making strategic and profitable investment decisions.
Sources: www.webuildvalue.com, sbi.sydney.edu.au, www.neom.com, www.planning.nsw.gov.au, www.realestate.com.au/advice/rent-to-own-home-schemes,www.publicsquare.com.au
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