Coffee Culture

For many inhabitants of the inner and middle ring suburbs, there is nothing better than getting up on a weekend morning after a long working week and easing into a local café for a nice coffee and some hunger busting, borderline fine dining breakfast. In fact, to be more precise, this is now become a ritual that has spread far beyond the trendy inner city enclaves that instigated Melbourne’s, and possibly Australia’s café culture.

To the casual observer or the savvy apartment investor, it appears ubiquitous with off-the-plan apartment marketing endeavors, that tying in the sense of the enviable café culture with the future developments lifestyle is a fait accompli.  This comes as no surprise as this marketing approach is clearly aimed towards the young professionals out there who are becoming increasingly time poor but possess high disposable incomes.

So how does the prevalence of trendy café’s affect your potential apartment investment and should you be looking at investing in areas where the café culture is well established or in up and coming areas where the café culture is not quite established?

To understand this question, we must firstly understand that buying a property of any sort has an inherent emotional connection with the suburb or property which needs to be controlled before putting on your investors hat and that the impact of café culture is not the only factor to take into account when looking at a potential apartment investment.  So with that, let’s take a look at a couple of the positives and negatives to both approaches.

Investing in areas with an established café culture

• Positives – When investing in established areas, it is safe to assume that your investment has a solid lifestyle foundation which will help bolster and maintain the rental return now and most likely into the future. Furthermore, as population density increases, it is almost a certainty that the establishment of other amenities and conveniences to cater for the increased population will follow.  An example of this can be observed around Smith Street in Collingwood with no less than 18 apartment developments either in development pipeline or under construction.  This area is well known for the abundance of café’s and bars all in close proximity to each other, which is very appealing for any owner-occupier, investor or renter.
• Negatives – Investing in an established café culture area with an abundance of a similar type of property could affect capital growth in the short to medium term which could also impact the rental return.  Also you could be paying a premium price for an apartment based on the proximity to café’s and shops when you could alternatively buy a nicer, larger apartment in a neighbouring suburb for a similar price.

Investing in areas with an up and coming or not established café culture

• Positives – Investing in areas with little to no café culture is an investment in the long term. There are many examples where apartment investors have bought in the not-so-trendy areas and have made a handsome profit after a few years primarily due to the proximity of these areas to established and trendy suburbs.  It can be assumed that much of this “ripple” effect can be attributed to the influence that the café culture has on attracting demand. Additionally, looking in areas that have good apartment development growth potential allows an investor to pick up a good value apartment in a prime location whilst potentially avoiding a premium price. In other words, allowing for good potential capital growth.
• Negatives – An investment in these areas may not see a good rental demand and therefore rental return in the short to medium term, which could be due to various factors. But more often than not, if you are willing to stick it out for a few years, then the return can be worth the wait. There is the risk that your investment may not take off at all, but history shows that the chances of this occurring are low as long as population growth and property demand continue.