Where should you develop in Sydney? Follow the latte and avocado trail

Sydney’s Dulwich Hill. The inner-western suburb is likely to feature in the next wave of gentrification as the number of Millennials surges. Wolter Peeters

Residential developers wondering where to buy next in Sydney should follow the latte-and-avo trail to suburbs likely to draw in Millennials.

Analysis figures shows a line of suburbs in the NSW capital’s inner-west – including Dulwich Hill, Canterbury and Hurlstone Park – that have yet to join the club of suburbs with 3000 people aged between 25 and 35.

Once they become part of the “3000 club” – as Newtown, Glebe and Erskineville then Petersham and Marrickville have already done – the demographic balance will tip in these hotspots-in-waiting, giving developers the opportunity to sell high-density sites they develop.

It will be crucial for those in the property industry to time their entry into these suburbs, marked by a line of lattes and avocados, to take advantage of the inner-west’s third wave of gentrification, according to the report Sydney’s demographic shift: The key to unlocking Sydney’s next development hotspots.

Follow the latte and avo trail: The next wave of Sydney suburbs to join the “3000 club”.

“Once a suburb hits a critical mass, its population can change overnight,” the report said. “Developers need to identify hotspots early in order to minimise their acquisition cost and maximise profitability.”

Rising population pressures and soaring housing costs pushed home ownership lower in greater Sydney and increased the proportion of renters up in the five years to the 2016 census, figures released in June showed. Over the same period, the number of households with six or more people jumped.

But subsequent, more detailed analysis of the numbers shows where the city’s Millennials are likely to move as the earlier wave of cheaper inner suburbs gentrifies.

The inner-west stretching from Newtown to Olympic Park will see as many as 12,000 units – a quarter of the total apartment pipeline within a 10-kilometre radius of the CBD – complete in the next five years.

The development opportunity for suburbs is held back in some cases by development controls however, and the avocado trail may lead to a dead-end. A lack of sites in Dulwich Hill zoned for higher-density development was likely to prompt more developers to look at Hurlstone Park and Canterbury, for example.

Older in the North: Sydney suburbs by age balance.

“There aren’t many suburbs that are both feasible for development and offer good demographics”.

While it was a less scientific measure, the increase in cafes in a suburb also pointed to demographic changes.

“Cafes are a leading indicator,” he said.

Changes in population also offer opportunities to developers in Sydney’s north shore which, with an ageing and wealthier group of residents, was one of the country’s largest downsizer markets.

While the north shore demographic was generally older than in suburbs south of the Sydney Harbour Bridge, a handful of suburbs in the north such as Roseville, Killara and Lindfield, were more evenly balanced between old and young.

These offered opportunities for developers who purchased sites on which they could develop larger apartments – planning controls generally prevent smaller ones in the north – and then sell to the likely influx of wealthier downsizers.

“Developers who get ahead of this trend can maximise gross realisations on their projects, provided they can acquire the appropriate site”.

Source: Michael Bleby, “Where should you develop in Sydney? Follow the latte and avocado trail”, Australian Financial Review, November 1, 2017

Apartment Development Future Growth Housing Affordability Inner West Market Trend North Shore Population Residential Retirement Sydney
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Where should you develop in Sydney? Follow the latte and avocado trail