Understanding the Consumer Psychology Behind Suburb Demand
It’s the million dollar question. What makes for a good suburb when purchasing a property? Why would people choose one suburb over another?
You may have heard the mantra ‘location, location, location’, which is generally great property advice. But, in practice it’s perhaps more a matter of balancing your personal priorities and finding a suitable, affordable location that will match your particular needs best and improve your own quality of life.
Firstly we have to differentiate between home buyers on the one hand and pure investors on the other, who might be motivated by different sets of criteria when deciding which property to buy and in what areas.
Then try to figure, what are the major psychological drivers when they decide on ‘the right suburb’ for them and why are they looking to buy property in the first place? Please continue reading to learn more.
In both cases, when either buying to live in a property or to invest in property, people are first governed by affordability, thereafter comes suitability. Simply put, we can only buy what we can afford. Once we have narrowed down the areas that do suit our own pocket, then we start applying our ‘psychological filters’ for narrowing down the options.
A good suburb to live in is often judged by its proximity to work, or easy access to freeways, trains, and buses. Also, social and community activities, amenities like schools, daycare, gyms, medical facilities, and supermarkets.
The demographics of an area is typically also an important psychological factor for investors when making a residential buying decision. Buyers may look at the ethnicity or the multicultural aspect of the suburb. Sometimes an area close to family or relatives is prioritized.
Two psychological criteria high up on the list of area selections are whether the area is considered safe and also whether there is peace and quiet, i.e. is the suburb away from busy highways and major intersections.
The life-stage of the buyer further plays a role, e.g. young couples and growing families are often looking for newer, developing suburbs with a more modern flavour and feel. Whereas midlifers and retirees might again opt for the more entrenched suburbs.
Sometimes interests or hobbies factor into the decision, for instance when people want to live in the mountains or near the sea and beaches to access a certain lifestyle, e.g. hiking or water sports enthusiasts.
What makes certain suburbs more desirable for apartment buyers? In a nutshell, the key psychological drivers for apartment buyers are typically convenience and easy access!
Whether a particular apartment is located within walking distance to amenities and public transport like railways and trams, dining establishments, bar precincts, malls, shopping, nightlife, and entertainment is often the dealbreaker.
Apartment purchasers often also like to know if there are property management services in the area. If one day they perhaps choose to move out of their own apartment but still keep it as an investment, then they want to rest assured that property professionals are available to look after it on their behalf.
Statistics and research on new apartments indicate better capital returns -measured over 10 years – for apartments closer to major city centres or central regional hubs.
Pure investors are most interested in gaining an acceptable return on their property investments. Typically, they do not wish to live in the property or use it for their own purposes. They see the property market as a mere investment class -other classes are shares, bonds, commodities etc.- and as a vehicle to make their money work for them.
The key psychological driver for a pure property investor is to find an area or suburb that will yield the surest and/or best return over the desired investment period. They want to achieve a market-related ROI and feel comfortable that their money is safe. Other factors often do not even come into play for pure investors.
Property investors are mostly interested in the cold hard facts associated with specific areas. Websites like Domain provide detailed market reports for suburbs and provide median prices, rental rates, and population demographics that they are looking for when making their purchasing decisions.
Smart investors typically also evaluate the future outlook and potential of an area, like imminent rezoning and improved infrastructure changes or a potential Influx of students or immigrants creating higher demand for rental accommodation. All of which often has the knock-on effect of increasing rental yields and property values.
Why Invest in Property?
There are many reasons to own property. Firstly, of course, we all need a place to call home, isn’t it? And it’s undoubtedly much better to pay off on an asset that will one day be yours, instead of just making a landlord ‘rich’!
Another significant reason for investing in property is its growth in value.For instance, using Australia as an example, property prices have grown on average at around 11 % per annum since 1926.
What’s more, property is an asset that can be borrowed against in times of need. Also, as the owner, you have direct control over the property and property can be willed to family or friends in your estate planning.
Different people have different reasons for making a property purchase. The market generally consists of those who need a place to live and others who purely use the property market as an investment vehicle.
In the preceding paragraphs we have demonstrated what the key psychological drivers are for both categories of purchasers, i.e. access, demographics and convenience for home buyers, and investment yield / sustainability for pure investors.