New research highlights some demographic trends that will shape the future of Australia's property markets. Investors should read these predictions.

Hindsight is a wonderful thing. Imagine buying a little beach shack at Whale Beach or a Carlton terrace in the 1970s sure in the knowledge that your investment 30 years ago would be worth 10 or 20 times more today.

While there is no magic crystal ball telling property investors where to buy (and where to avoid), understanding the key trends and factors shaping property markets over the long term can provide important insights.

Follow the baby boomers

Australia's population is ageing – and no group is more influential than the baby boomers. Australia has more than 4 million of them and they are the leading trendsetters of our culture. Now aged between 44 and 59, baby boomers are the country's largest generational group.Their gradual shift towards retirement over the next decade will have a profound influence on the residential property market

Bernard Salt, a demographer with professional services firm KPMG, says baby boomers "downshifting" from the large family home to a smaller apartment or townhouse in inner to middle-ring suburbs offers an opening to astute property investors.

"Despite the short-term over-supply of inner city properties I still feel apartment products or townhouses have a lot to offer," Mr Salt said. "That sort of product should do quite well because not everyone wants to live on the coast and leave the city."Also primed to perform well in response to baby-boomer demand are the sea change or tree-change properties that allow aspirant retirees to gradually move away from full-time work.

Mr Salt said this trend, while already well established, was destined to continue and would influence markets within a two to three hour drive of a capital city.

"Australians typically retire at the age of 58 and that is six years out from full retirement. This means that baby boomers will be increasingly trying to position themselves into lifestyle retirement property," Mr Sale said.
"They will have retired from full-time work and they might only work two days a week from home," he said.

Urban consolidation to drive values

On the property front, Mr Salt said a tightening of town planning regulations, which look to increase urban densities, will put a premium on golf course developments within urban areas.

"This is largely because we will not get that type of property offered again," he said.
"There is already a number of these developments in Sydney, Melbourne and Brisbane, but to have an enclave where there is an assured amount of open space, with limited product development, within a metropolitan area has to be increasingly well regarded."

Rising costs and shrinking supply create rarity value

Supply and construction costs are chief among the factors determining the future of the property market according to the managing director of analysts and planners Macroplan, Brian Haratsis.

"Looking at apartment dwellings, we are convinced that the cost per square metre will increase significantly over the next few years. One of the things to look at then is the replacement cost of dwelling types. This is something that will change how investors price an investment," he said.

Mr Haratsis said regulatory constraints on land, which pushed up the value of development land both in premium suburbs and on the perimeter of growth boundaries in Melbourne and Sydney, also offered opportunities for investors

"Investors need to look at medium density product in areas where it is difficult to get development approvals … (and) lack of practical supply near the growth boundaries had lead to a significant increase in demand," he said.