This week’s topic is something we all need to consider as we begin to build or even to reshape our investment portfolios.
The rapid explosion of suburban development from the 1960’s came along with access for most people to their own car and strong population growth. With it, the dream of the quarter acre block, 3 kids, dog, Holden Car and a big backyard became real. Urban sprawl is the type of thing you tend to forget about if you’re living in it, except maybe when you’re stuck in traffic inching home after work. But it does a lot more than cause road rage.
According to a new US Study, Measuring Sprawl 2014, urban sprawl also makes us fatter, sicker & poorer and it is the source of 50% of the carbon footprint of the USA. It is reasonable to expect similarities with the Australian market.
The study finds that people who live in densely populated regions benefit in many ways. In brief, they have greater economic mobility, they’re healthier, and they live longer.
It’s also cheaper to live in dense cities. In those areas, people spend slightly less of their income on the combined cost of housing and transportation. (They have more low-cost transportation options like trains, subways, light rail, and walking, which of course is free.)
People who live in compact cities also tend to live about three years longer than people who live in less compact cities. The gap is probably thanks to more driving (which means more fatal crashes), a higher Body Mass Index, higher blood pressure, and more diabetes in less-compact cities.
The environmental impact of suburban development is also under scrutiny. According to a new study by researchers at the University of California, Berkeley, population-dense cities contribute less greenhouse gas emissions per person than other areas of the country, but these cities’ extensive suburbs essentially wipe out the climate benefits. Dominated by emissions from cars, trucks and other forms of transportation, suburbs account for about 50 percent of all household emissions in United States.
The lower cost of cheaper homes in far flung suburbs is rapidly being recognized as not real savings at all – when you consider the cost of fuel, time spent in the car travelling, parking and other direct costs, let alone the benefits to the economy and environment of more dense living styles.
It is not something that has been palatable to Australians in the past, but that is changing – for economic, environmental and lifestyle reasons.
And that means as investors that you need to consider carefully the choice of property that you want to own. Because investing is about the future – future returns from growth and rent. And the future will mean higher demand for less expensive, more compact, well located property that is on or near transport links. And higher demand is likely to mean higher rental returns & capital growth.