Where are the degentrifying suburbs?

In another thread ( http://www.somersoft.com/forums/showthread.php?t=24906 ) Monoply said:

Yes, a lot of people have had great capital gains in commission areas. As good people slowly move into the area, prices rise, and the riff raff cannot afford those areas, so they continue to get better and better.

The thought then ocurred to me that the so-called 'riff raff' still need houses.

So where do they go?

It's very common sport here for people here to spot 'gentrifying' suburbs with better than average growth prospects.

However by definition, 50% of suburbs will have below median growth performance. Some might be only a percent or two pa down and catch up in the next cycle.

Others may exhibit more sustained underperformance (over 20 - 40 years or more).

I will call these the 'degentrifying' suburbs.

Though there's not much talk of it here, there must be a fair number of these 'degentrifying' suburbs.

This may not be obvious if the houses are solid reminders of a more prosperous past. Or, if a newish estate, the mod-cons on houses may convey the impression that the suburb is pretty swish.

In Victoria, the change in income distribution of areas like Moe and Morwell show unmistakable degentrification in the last 30 years. Long-term changes in relative property prices in areas like Dandenong may also indicate degentrification there (not that Dandenong had much of a gentry to begin with!).

Anecdotally, a work colleague said that she liked living in Hoppers Crossing 10 years ago, but moved out recently due to crime and delinquent adolescents. She thought that this area was degenerating.

New estates in areas like Cranbourne North (rated last in last year's 'Age' liveability survey) may or may not follow this path. If it does, then this too could be a degentrifying suburb.

Established suburbs also have varying fortunes. In Melbourne, studying the changing fortunes of suburbs like St Kilda, Richmond and South Yarra could be instructive.

For evey gentrifying suburb, there must be one degentrifying suburb. I'd be interested to hear some examples, and, even better, how to spot them.

Peter
 
Hello Peter

That's an interesting subject.

Doveton took a direct hit when Heinz closed their operations over the road, yet Doveton still has much potential just with a different market.

I would suggest that de-gentrification comes not necessarily from loutish behaviour - which can be more in the eye of the beholder rather than indicative of underlying social dysfunction. In other words, as we get older the gangs of marauding youngsters ripping up letterboxes become more, not less, disturbing. It doesn't necessarily mean that more letterboxes are biting the dust, just that we notice it more.

The ageing of a local population will mean less money available to spend on home and property maintenance, and an area can lose it's vitality quite quickly. Small local businesses close because the discretionary expenditure drops away, and the neighbourhood can develop a rather forlorn look.

If the only money being spent in an area is by the local council on necessary works and not by the householders themselves eg nature strips becoming overgrown, front gardens becoming front yards, then an area will not appeal to the young families and thus not attract new money. Investors will also keep away, and the sinistral spiral accelerates.

However, as in Ringood, where it is not uncommon for advertising to promote a property as 'First time offered in 50 years' the basic infrastructure speaks louder than the peeling paint or shrubless garden.

And so the uplift starts, at first slowly, then as more young families move in, gaining speed.

So I would suggest the areas with a high proportion of empty nesters and older folk are the areas more likely to edge into cyclic decline.

Cranbourne and other outerlying areas are not so outerlying nowadays, thanks to freeways and industry moving into the growth corridors. The inbetween areas, such as Hoppers Crossing, will benefit from the Wyndham Vale developments and the injection of discretionary spending in the general area.

When Grollo researched Greensborough in 1989?? they found that something like $80 million per year was being spent out of the area, as there was no cohesive shopping district. They calculated that a new shopping plaza would pay for itself within two years.

The run down or under serviced areas are everybody’s gold mines. I would not have a problem buying in Moe or Morwell, or Churchill for that matter. There will be a new Safeway in Churchill within the next twelve months, so if Woolworths is prepared to invest in the area they must be confident of capturing the money that is leaving the town and currently being spent in Morwell.

There are always subtle indications of the financial health of an area. Elderly and other limited income families have to live somewhere. As the inner areas become gentrified, with a commensurate rise in rents, the people with 30% or less of their limited or fixed income to pay on housing are pushed further out.

If I was looking to buy residential investments right now, I would buy in Noble Park, Sunshine, Hoppers Crossing, Melton etc and of course, Kilsyth. At this stage in the cycle I would set a limit of well under $200,000 for buying, scrub and paint the place and add a little benefit, and most likely enjoy a long term tenant as a result.

After a decade of property investment, I am more convinced than ever that the penny dreadfuls are the backbone of investing. Maybe 'Building Wealth Story by Story' has influenced me more than I realise. The unpretentious painter with 50 houses would ride the cycles with a lot more ease than, say, the investor with 5 smart, modern townhouses reliant on high rents from people who could well afford to buy their own homes.

So perhaps this isn't what you were asking but there are a lot of rough diamonds out there. We can be far too picky!

Cheers

Kristine
 
Hi Kristine
Very interesting post, and makes sense.
I was wondering that for the areas such as Noble Park, Sunshine, etc, what type of rental returns would you expect for the properties you describe?
 
Frankston

I like Frankston - with the Scoresby by-pass, the CAD initiatives (apartments in central frankston), the marina (when its passed and built), its on the Bay, a city already (everything is there), gateway to the peninsula etc etc.

Its an underrated area.

I hit the roof when my parents decided to move there 15 yrs ago. If i did not work in the city i would live there myself. Unless you work in the city its got everything.
 
toony said:
I like Frankston - with the Scoresby by-pass, the CAD initiatives (apartments in central frankston), the marina (when its passed and built), its on the Bay, a city already (everything is there), gateway to the peninsula etc etc.

Its an underrated area.
Ahhhh Frankston!! ;) Perfect in some spots, not so in others!! :eek: Like many suburbs, there are good pockets, and there are real "holes". :( Frankston has been "underrated" for many years, and is only just now starting to turn around, but be warned, that is NOT ALL of Frankston, only the nice bits ie. south and central zones; the north is still very much an "undesirable" stomping ground, and `gentrifying' it will take some years yet. But hey, like the ad says "it won't happen over night, but it WILL HAPPEN"!!! :p :D
 
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Monopoly said:
the north is still very much an "undesirable" stomping ground, and `degentrifying' it will take some years yet. But hey, like the ad says "it won't happen over night, but it WILL HAPPEN"!!! :p :D

So you think that Frankston North/The Pines is a bit like the 'J-curve', ie will it degentrify and only later start to gentrify?

Peter
 
Spiderman said:
So you think that Frankston North/The Pines is a bit like the 'J-curve', ie will it degentrify and only later start to gentrify?

Peter
No far from it Pete, it was a "typo" now fixed ("my bad") :eek:
 
Spiderman said:
The thought then ocurred to me that the so-called 'riff raff' still need houses.

So where do they go?

....

Peter

They move into my rental property I spoke of last night....... I am contributing to the degentrification of that suburb!! (well, at least of that street according to the neighbours...) :)

Cheers,

The Y-man
 
In Melbourne I think Southbank, Docklands, Berwick and Caroline Springs are examples of suburbs that are de-gentrifying. Anywhere a suburb is dominated by new buildings is on the way down, as once everything in a suburb is new then the only possible way to go is down.
 
Kingbrown said:
???

Thats just plainly wrong.
Well lets hear your ideas then, a post like that helps noone increase their knowledge.

My understanding is that gentrifying suburbs are ones on the rise relative to others. Typically these are areas where housing stock is old and run down and the fixer-uppers are moving in to renew the properties. Therefore perhaps the opposite is also true, where de-gentrifying suburbs are those that the fixer-uppers are not moving in because the work has already been done. Therefore relative to others it's on the slide, simply because it's not moving ahead whilst other suburbs are. Perhaps it's because the area is less popular for other reasons, eg, a major employer closing down.
 
Don't know much about overdeveloped inner suburbs but certainly the
McMansion belt is at best on a J-curve, it's got to go down before it can
come up because a buyer can buy a new house just down the road,
therefore a second hand house will be worth less than replacement cost.

Remember, buildings depreciate and land appreciates. But not all land
is created equal, close to ammenities appreciates faster.

Where do all those folk who live in the estates go to visit the dentist?
A long way I'd guess.

andy
 
mdk92 said:
Well lets hear your ideas then, a post like that helps noone increase their knowledge.

My understanding is that gentrifying suburbs are ones on the rise relative to others. Typically these are areas where housing stock is old and run down and the fixer-uppers are moving in to renew the properties. Therefore perhaps the opposite is also true, where de-gentrifying suburbs are those that the fixer-uppers are not moving in because the work has already been done. Therefore relative to others it's on the slide, simply because it's not moving ahead whilst other suburbs are. Perhaps it's because the area is less popular for other reasons, eg, a major employer closing down.

I dont think its about the age of the property or the 'newness' of it, but rather the quality of the people - ie the demographic.

Comparing southbank / docklands to caroline springs is completely wrong imo.

Southbank / Dckds will continue to get professions/young middle upper class people moving in. Restaraunts/things to do/shopping centres are expanding. Its so close to the city that as this stuff develops more and more people will want to live their - especially straight out of uni/before kids etc.. This will increase the desirability of the place and possibly land values. (Ok. keep in mind that most of the places there are apartments with no land value, but I'm talking about the general social concept of gentrification - and not were is a good 'investment' directly).

Caroline springs (sorry to pick on it!) is (to be honest I have no idea why people would live there - so I will guess) where young couples with kids and low incomes go so they can buy their families the 'aussie dream' in a place they can afford - and the established suburbs (ie camberwell, hawthorn, burwood, chadstone, etc..) are too expensive for them.

Issue is - there is no proper infrastructure - it is too far away from the rest of town to get its own infrastructure quickly (plus there wouldnt be a good business case cosnidering the demographic/income lvels/geographic isolation). Basically in 15 years time you will have a generation of heaps of bored, 15-20 year olds living there, in a predominantly lower-middle class environment.

Not a recipe for gentrification or increasing property prices.

Thats my opinion, could be wrong. My friends and I have a rather rude moniker for caroline springs which I'll keep to myself!
 
mdk92 said:
Well lets hear your ideas then, a post like that helps noone increase their knowledge.

My understanding is that gentrifying suburbs are ones on the rise relative to others. Typically these are areas where housing stock is old and run down and the fixer-uppers are moving in to renew the properties. Therefore perhaps the opposite is also true, where de-gentrifying suburbs are those that the fixer-uppers are not moving in because the work has already been done. Therefore relative to others it's on the slide, simply because it's not moving ahead whilst other suburbs are. Perhaps it's because the area is less popular for other reasons, eg, a major employer closing down.

Hi mdk92,

I like your logic, but in some cases it needs to be tweaked for established areas Vs master-planned communities such as Forest Lake and Springfield Lakes in QLD.

With regards to established areas, let’s take Southbank in Brisbane (2-3km from CBD) - since Expo 88, its been development after development. It’s mainly a commercial hub, but there’s still a few pockets of old housing along Stanley street and near Musgrave park where renovators do have the ability to work their magic. However, they are not moving in because I suspect old time Italian/Greek owners are always holding out for big bucks from major developers, therefore out-pricing any hopes smaller investors might have. So its not a case where everything is new that’s the stumbling block, but that its hard to find much value. However, this situation doesn’t’ mean the area is de-gentrifying at all - the big boys are doing a wonderful job of pushing this area into new realms of gentrification and beautification.

de-gentrifying suburbs are those that the fixer-uppers are not moving in because the work has already been done

I assume by that you mean master-planned areas that major developers like Delfin Land Lease are well known for – eg, Springfield Lakes, Forest Lake in QLD. If so, then I agree that fix-uppers see no value in these suburbs.

With regards to de-gentrification of new suburbs, I think you make a valid point. For instance, Forest Lake is a good example of what happens to these ready-made suburbs, when developers, in search of more profits, shift their attention to nearby areas with endless land potential. Suddenly, your suburb becomes the forgotten cousin, whose once-new properties start to show their wear and tear in comparison to the fresher and in-vogue developments such as SpringField Lakes.

Sometimes it doesn’t even take a newly developed community to produce a negative impact on an existing one – it can happen because of factors within the suburb itself. For example, you can see over the years how the original sold-off stages of Forest Lake have slowly turned into small ghettoes of low socio-economic families, as newer and brighter stages became available. The newer stages attract the money and interest, which sucks it away from the older stages. Investors suddenly have to drop their rents to attract the tenants, which in turn brings the low-income earners.

I see these ready-made suburbs with their fresh, new and family-packaged values as a facade built on fragile foundations and fickle economics. You’re paying over-inflated prices on new property, which bad enough in itself, but when there’s endless reserves of nearby land waiting to be developed into bigger and brighter versions of what you already own, then it spells trouble.


George
 
Hey All,
This topic reminded me off a conversation that i had with my wifes grandparents who built a brand new home through a builder for a combined cost for house and land of $500.

It was in Glen Waverley 50 years ago (yes a long time ago!!!) and in thier own words it was in a street that backed onto nothing. Friends said why would they want to live all the way out there, theres nothing there!!

That nothing is now the rest of Glen waverley, wheelers hill, scoresby, rowville...etc.

Its probably worth $350k-400k and no one would question the infrastructure surrounding the area would they?

Even by my rough calculations, that property has doubled in value approx 9 times in that 50 year period.

Couldnt todays outerlying areas go down the same track?

Just my thoughts,

Nathan
 
Couldnt todays outerlying areas go down the same track?

Hi Nate,

I think the answer might lie in yor post - 50 years....in other words, a long long time.

Put it this way - Brisbane's population would have to reach such enormous levels, that people would be forced to live upwards of 60-100km from the CBD because of land scarcity....in this situation, suburbs like Forest Lake would seem quite handy to the CBD. In addition, most of the homes by this stage would be 60-70 years old and ripe for renovation, thereby bringing a new focus back to the suburb, one where investors see the potential to make money. This would drive prices up, bring in a new demographic and most likely force any existing riff-raff further out....in all, the fundamentals could be right for a swing back to gentrification.

So yes, Forest Lake one day could be viewed as a very desirable and classy area. But who's going to wait 50 or so years?

On the other hand, Forest Lake could go the way of Woodridge, Inala and slowly degrade to a standard where the stigma never goes away. Ok, that's an extreme example, by my point is - you don't really know how an area will be socially and economically shaped into the future. It’s very difficult to say.

For example, look at somewhere like Balmoral and Bulimba on Brissies east-side…. these suburbs circa 1998-99-2000 were on par with say Coorparoo, East Brisbane, Kedron, Yeronga – ie, nothing outstanding - but after the boom hit in 2001 things were never the same again….they suddenly turned from run-of-the-mill to in-vogue, out of sight and hip-to-be-square. And no one saw it coming. So you just can't predict.

PS.….maybe not a good example, as Forest Lake doesn’t sit on the Brissie river, its near Inala and Carol Parl and there’s a zillion hectares of nearby land just waiting to make it insignificant.


George
 
Hi,

I think just as interesting is the stigma we place on such suburbs.

I'm sure there were suburbs that all of us, as kids perhaps, lived in or near that the majority of society regarded as "bad", for lack of a better term. I remember as a child living in what was generally regarded as an above average suburb but a nearby one was quite the opposite. In the past few years that I've been investing, this previous belief has prevented me from buying in that suburb. In hindsight, the stats suggest that it has done very well.

I moved to a new State quite recently. Upon networking with others and forming new friendships in my new location, I have noticed that some suburbs' residents don't like to admit they live there, or await stereotypical reaction from the other party to the conversation. As I have not been privy to the history of most suburbs here, I have only my own analysis, gutfeeling and stats to go on, and think because of this, the chances of success are far greater.

Do most others here agree we often let past opinions of such suburbs get in the way of making money? For instance the logans in brisbane, the elizabeths in adelaide and the kwinanas in perth have all done very well, are examples that come to mind. :eek:
 
dtraeger2k said:
Do most others here agree we often let past opinions of such suburbs get in the way of making money? For instance the logans in brisbane, the elizabeths in adelaide and the kwinanas in perth have all done very well, are examples that come to mind. :eek:

You're absolutely spot on there dtraeger2K - people have a mindset about certain suburbs and I reckon that keeps them 'undervalued' for years. I wonder what it is that changes that mindset and how long it takes. Elizabeth - yes I grew up in Unley and was brainswashed into thinking Elizabeth was the 'slum' suburb (although there were no real slums in Adelaide). 5 years ago I had to work out there for 6 months and was blown away by how nice the area around the hospital was - and love the shopping centre. I believe the unemployment is still high (Holdens factory ebb/flow) but not in my wildest dreams could one consider the area a slum. However if I mention investing out there to friends who live south - they shudder!

We also never cared much for Keswick, Bowden or Brompton - close to city but light industrial. The latter 2 suburbs have become trendy. Keswick is still undervalued compared to Ashford next door. I don't get how this happened. I used to live at Keswick ('85) and could walk into town. I've driven past my old house - single fronted Edwardian bluestone with lacework under bullnose verandah - and it still has same paintwork that I put on! No one has identified it as a 'desirable' house to do up. The same house in Brompton wouldnt' be on market for 5 minutes before a young couple bought it to do it up.

When I was in Brisbane I really thought Woodridge had potential but all my Brissie friends shuddered! It has a reputation for high crime, they said. I ended up buying in Sunnybank Hills because I found a 'bargain' but I'm still considering Woodridge and think it very good value as I don't have the same mindset.
 
Hi,

I think just as interesting is the stigma we place on such suburbs.

Do most others here agree we often let past opinions of such suburbs get in the way of making money? For instance the logans in brisbane, the elizabeths in adelaide and the kwinanas in perth have all done very well, are examples that come to mind. :eek:

So is anyone buying in Noble Park at the moment?

Or Sunshine; the only Melbourne suburb still with double-digit unemployment?
 
In Brisbane at the moment the spot light is onNorthlakes, and its wild gangs of bored agressive teens.

I'm not taking it too seriously though, not that Northlakes is my scene - as I have expressed in other posts. But it seems that anything that happenes out there, for example a car being stolen, a dispute between a neighbour and the teen next door, where a punch is thrown and someone gets 1-2 stictches. This would not be reported if it was anyother suburb, just seems certain parts of the media- in particular Courier Mail love these stories.
 
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