According to Ashley Wain and Adam Murchie, directors at private investment firm Forza Capital, investors should look towards suburbs just outside Australia’s city centres as opportunities for future growth.
The pair advised investors to seek out land holdings in such “middle-ring” suburbs, as the curtailing of credit to residential developers along with reduced government spending on infrastructure will see the current growth of fringe areas come to a halt and force new residents to settle elsewhere.
“Developers are unable to finance and develop sites, and yet we have very strong long-term population growth,” said Mr Murchie.
“In Melbourne alone, we have witnessed an average of 145,000 new residents per annum over the last two years.”
“Looking forward, we see a real need for future supply. Over the last 20 years, 53 per cent of this growth has been accommodated on the fringe. However, infrastructure constraints will become an impediment to future significant growth on the fringe.”
Mr Wain said governments will likely attempt to alleviate this demand pressure by promoting population growth in areas closer to the city centre with good public transport and social amenities nearby.
“There are only so many new train lines, hospitals and schools that governments can build on the fringe. As such, governments will look to locate people where this infrastructure already exists,” he said.
Mr Wain highlighted that this likely shifting of population presents an opportunity to investors, as land holdings in these areas may be purchased and sold to future developers at a profit.
“With time, the investment performance of such sites can often be exponential and generally with reduced risk as you always have a fallback position – they are very hard to find but are worth the wait,” he said.