1st Home Buyer Wants

Fast facts about 1st home buyers – who they are; a brief description of a typical 1st home buyer; what they think about when looking for a first home; preferences; and what most buy.

  • 25 to 44 years
  • 3 people per household
  • 36% no children at home
  • 30% couples or living alone
  • A projected 26% of total new housing demand over next decade (in this case for the Brisbane outer suburbs)

Brief description

  • HECS
  • Portfolio work not long-term work commitment
  • Partnering later
  • Parents as friend
  • Sex, less stigmas, very little tradition
  • Fewer children
  • In short, options galore – so it is not until their late 20/early 30s to early 40s that many buy their first home

Housing considerations

  • Room to grow
  • Affordability
  • Property improvement
  • Tenant/s

Preferred housing options:

  • 10% to 20% – apartments (inner city)
  • 20% to 30% – townhouses/duplexes and similar multi-housing products (middle-ring suburbs)
  • 50% to 70% – detached-based homes (mostly outer suburbs)

What most buy?

  • A property that can be improved – so they often buy an existing dwelling – in fact four out of five 1st home buyers buy an older established home
  • What also appeals is a property that is capable of taking in a tenant/s to help pay the mortgage

Something to think about

Given that first home buyers are looking for a home they can improve – and when it comes to a middle or outer suburban setting – our discussions with this market segment suggest that a new smaller, yet high quality house (being either a one or two-bedroom property) has considerable appeal.

The key is that this home is sold with an approved building extension/improvement plan and costing in place – so that they can expand the house, within a set time frame and budget.

This arrangement allows a young couple to afford a home now – maybe gain some additional rental income over the short to medium term – and expand (or improve) it as their needs change and/or finances improve.

3 Urban Myths

Urban planning in Australia appears to be lost in a dense fog of presumption and theory.   Myths perpetuate.

This Missive covers three such urban myths.

Myth 1 – Higher densities mean less traffic

The theory is that higher densities around existing public transport networks will see a lift in public transport use and fewer cars on the road.

Public transport accounts for about 10% of total trips in our major cities and most urban metropolitan strategies aim to increase this to 20%.

So, four-fifths of the trips will, at best, still be via private vehicle.  Why?  Because the car is much more convenient.

Without serious infrastructure commitments to repair and upgrade the public transport networks in our cities, cars will continue to dominate.

Under current conditions, and somewhat ironically, inner city and middle-ring residential development is resulting in more traffic congestion.

Myth 2 – Urban consolidation is better for the environment

This implicit assumption is now widespread.  Yet, the available evidence suggests the opposite.

  • Comparison between suburban houses and attached product often overlooks the number of persons per household, which is much higher in the traditional suburban detached house.
  • In traditional suburban detached homes, larger household numbers share various facilities – the refrigerator; television; washing machine; dishwasher etc., and even the lighting needed to light a room. The per capita energy, and even water consumption, is more efficient in suburbia than in more central urban locations.
  • The nature of high density apartments is, in itself, prejudicial to positive environmental outcomes, due to things like clothes driers (lack of outdoor drying areas), air conditioners, lifts and the need to service (lights and air-conditioning) common areas.
  • Also, suburban development allows for wider footpaths and private yards, which in turn provide space for trees to grow. There is less opportunity for greenery – a key producer of carbon offsets – in higher density urban development.
  • Moreover, the greatest correlation between energy and water use (and hence, environmental impact) is based on per capita income. Wealthy people consume more energy/water and thus have a bigger environmental impact.  Only the top 10% can afford a downtown apartment.
  • And research by the Australian Conservation Foundation found that in almost all Australian cities, inner city housing produced higher per capita greenhouse emissions and had larger eco footprints than outer suburbs, notwithstanding the greater access to public transport.

Myth 3 – Most jobs are downtown

There is a widespread presumption that central business districts and their immediate fringes contain the majority of jobs in a city’s economy.

Developing housing further from the downtown area, the argument goes, will only mean more congestion as commuters try to get in and out of the downtown area.

It is easy to understand how this myth developed – the CBD/fringe holds the tallest buildings; the seat of government is often located there; so, too, are many cultural facilities; they are the hub of train/tram networks and the focus of much of our angst about traffic congestion.

But the inner city suburbs are home to around 25% of all jobs in a city’s metropolitan area and just 10%, when looking at the CBD alone.

So, 75% of our jobs are actually outside of the downtown area.

The implications of this are profound.  Our elite friends often propose policy based on this myth: that urban dispersal of housing will mean longer commutes to work.

The facts are that most commutes within a city are across suburbs and not downtown.  Unfortunately, this type of travel (and the nature of the work involved) makes it impossible to service efficiently via public transport.

So in truth, more housing on the urban fringe will not, in itself, lead to more inner-city congestion, but will produce more suburb-to-suburb work trips.

End note

Perhaps, as a priority we should:

  • Add more vehicular river crossings in a city like Brisbane,
  • Create a better ring-road system, and
  • Decentralise more of the workforce to suburban and regional locations

…rather than advocating downtown infill redevelopment and heavy inner city-centric infrastructure spending as a cure-all.

Pulse Points

I apologise for the length – a rare thing for me to get to say, given my size, stature and makeup.   But seriously, some Missives are more important than others.

Please grind through this one.  It is driving my investment thinking.


A select few areas in Australia generate most of our wealth.

These are often a very long commute from where many Australians live.

If the current trends continue, more people will want to live closer to these economic generators; hence the rising attraction for more compact living.

But most cannot fit into or afford to live in a downtown apartment.

More infill development is needed, coupled with better transport infrastructure, plus an active government programme to decentralise some of our knowledge-intensive work activities to our more suburban settings.

This reissue – yes, we have published this as a PDF in the past and it is a summary of a great report from the Grattan Institute (go here to get the report) – for mine, also shows that investing outside of a major “economic” centre is increasingly fraught with risk.

There are exceptions, but the trends appear to be stacked against them.

A brief history

Just over 100 years ago, we were actually living our reputation – dependent on the bush.  About four million Australians lived on rural properties or in small towns of fewer than 3,000 people.  Most were market towns, serving the agricultural economy.

Only a third of Australians lived in a city the current size of Toowoomba (i.e. over 100,000 people).  Primary production, including mining, was almost all we did.

Post WWII, manufacturing took over from growing and digging things, accounting for a quarter of the workforce and a third of our GDP.

This led to a rapid rise in household wealth and a big shift to urban living, especially suburban homes.

By the time I was born – the mid-1960s – three out of five Australians lived in a major city.

Manufacturing has greatly influenced how our cities are laid out.  Industry needed cheap land.

The rise in car use and ownership helped make manufacturing and suburbia go hand in hand.

By the time I started high school, four out of every five trips were made by car.


Fast forward to today and Australia is no longer driven by what we make, but rather by what we know and do.

Yes, mining has been pivotal to our economic growth in the recent past, but it employs just 2% of the workforce, and has never accounted for more than 10% of our GDP.  At last count, it made up 5% of our economy.

Our economy is increasingly becoming knowledge-intensive, more specialised and much more interconnected.

Think – specialisation of labour – three very important words to really grasp.

Australian cities

Did you know that our five largest urban areas – Sydney (plus Wollongong and Newcastle); Melbourne; south-east Queensland; Perth and Adelaide – account for almost two thirds of our economy?  That’s 67%…and that isn’t a typo.

Our graphic, this update, maps out the Australian economy.

Australia’s largest cities are critical to their respective state’s economic performance, with Melbourne, for example, accounting for 79% of the economic activity in Victoria, whilst Brisbane (in the most decentralised state), makes up 46% (with SEQ 59%) of Queensland’s economy.

Brisbane’s economy alone is estimated to be in the order of $136 billion.

Even regional economic activity and its growth are tied to our larger cities.

Regions within an acceptable commuting distance are typically growing much faster than more distant regions.

Of course, in each city, economic activity is more concentrated in some parts and less so in others.

In fact, many parts of Australia’s cities produce relatively low levels of economic activity, despite a lot of people living there.

Most live in these areas of low economic activity and commute to work in employment nodes.

Brisbane case study

The Brisbane CBD generates about 20% of the city’s economic growth.  This is six times that of the next most productive area in the greater Brisbane area.

These secondary centres of economic activity include Rocklea/Acacia Ridge, South Brisbane, Paddington, Fortitude Valley and Brisbane Airport.  As is the case with the other major capitals, most of Brisbane’s economic activity takes place in and around its CBD.

Why? Because businesses are more productive when they interact with larger numbers of customers, suppliers and competitors – and when they are forced to do so with more frequency.

Again, think specialisation of labour.  This is the real force shaping whatever lies ahead – urban development, jobs, investment, wage growth etc.

The same phenomenon applies when looking at why larger cities are more economically productive than smaller ones, or those in other parts of country.

Today’s conundrum

Most Australians today are employed in the service industry; and whilst a lot of these are becoming more knowledge-intensive, or at least involving greater use of technology, seven out of ten jobs still remain outside of our inner city areas.

It’s true that a large number of knowledge-based workers believe that the benefits of living close to the city outweigh the higher cost of housing; less dwelling space and generally greater expenditure needed to be an inner city resident.   Yes, it does cost more.

But many of us cannot afford to live downtown.  Yet, for the economy to function, we do need to live within an acceptable commute to work.

Even more so, if we are to see more part-time jobs being created in the future.

This casualisation of the workforce is due, ironically, somewhat to our greater use of technology and increasing emphasis on becoming a more knowledge-based economy.

So, either more infill housing needs to be built across our middle and outer city suburbs; or we need better transport systems between home and major places of work; or more knowledge-based work needs to be moved to where people currently can afford to live.

A combination of all three is what’s really required to help Australia’s economy grow.

End note

It appears somewhat safe to assume that the service industry will remain our biggest source of employment and increasingly the muscle behind our economic growth.  Once more – labour specialisation.

Most service-related jobs are concentrated in small areas.  As a result, our economy is – as our map clearly shows – clustered into a handful of urban areas – and within them, in even tighter geographic confines.

This geographic trend looks set to continue – even accelerate – into the future.

That being true, then it looks to me that it would be best buying an investment property in one of the bigger red dots on our map, rather than in a more regional locale.  Of course, good exceptions do apply.

When it comes to buying within an area itself, it might be best to buy as close to one of the city’s economic “pulse points” as you (and your tenant profile) can afford.

Matusik Better Townhouse Buying Guide

My first property purchase was a townhouse.

We made a mistake buying a two-bedroom place rather than one with three bedrooms.  Well, it wasn’t that big a mistake really, except on resale we would have got a bit more in terms of capital gains if we had shelled out a bit more initially for a larger townhouse and one with a slightly better internal layout.

Townhouses are a great alternative to the more traditional detached house or a much smaller apartment.

For mine, we aren’t building enough townhouses in our middle and even outer suburbs.

But like all housing products and investment in general, there are some which do better potentially price growth and rental return wise than others.

We stress, we are not financial advisers, but we do have an opinion.  We also have worked on close to 120 new townhouse projects under our project advice service over the past 20-odd years, so we have done some homework on the subject, too.

Here are our 30 rules for better townhouse buying.


  1. Stick to middle-ring locations, typically 5km to 20km from the GPO.
  2. Stay close to major transport routes – rail first, then major roads, then busways.
  3. Best if within a ten minute commute to major employment nodes – hospitals, universities and major retail.
  4. Good if adjacent to regional open space, with some destination/lifestyle facilities, retail within a short walk or quick commute.
  5. Many townhouse occupants (especially tenants) work in trades, retail, health, education and tourism – they need cars.
  6. Owner resident profile is often first home buyers or older ‘downsizing’ buyers, but increasingly couples with young children – so they spend a fair bit of time in their homes.
  7. In general, target suburbs with aging demographics and declining household size.
  8. Look for elevated sites in locations with external grid patterned streets.
  9. Well landscaped locations.
  10. Pay about 10% less than the price of a traditional older detached house in the immediate area.

Site layout

  1. Stick to smaller projects, less than 50 within the complex.
  2. Best, too, if there are smaller precincts within the overall project.
  3. Limited facilities – better to have some real useable open space, with BBQ/covered areas than a fancy pool, tennis court, gymnasium and the like. Low body corporate fees are important.
  4. Wide enough internal roads, with easy circulation points, to manoeuvre a family sized SRV. In short – two-way driveways.
  5. Duplex arrangements are far better than long rows of townhouses. The fewer shared walls the better. More internal light; better ventilation; more private outdoor space plus less next door noise.
  6. A variety of building setbacks and slight change in internal road delineation is better than everything being straight.
  7. Secure letter boxes and garbage corrals at the entrance/s of the complex.
  8. Visitor car parking allocated in small clusters throughout the project.
  9. Several landscaped nodes throughout the complex.
  10. Combination of old school with modern technology i.e. brick based ground floor treatment with high quality lighter weight material for the second storey.

Individual design

  1. Three bedrooms; 2.5 baths (one being downstairs WC) and two cars, with one at least in a secure private garage.
  2. Galley kitchen with bench space to seat three people.
  3. Kitchen, living and dining downstairs and bedrooms/bathrooms upstairs. Dining area needs to seat four adults. Master bedroom needs to house a king-sized bed, the other bedrooms a queen.
  4. Open plan downstairs living with good natural light and flow through ventilation.
  5. Covered patio space (again, big enough to seat four people) with private open space, living area and kitchen all facing north, where possible.
  6. Master bedroom has good robe space and ensuite (with double vanity, shower and operable window). Shower over bath in second bathroom.
  7. Dedicated study area or MPR, often best on the second level.
  8. Separate laundry (best not in the garage) with good storage provision.
  9. Carpet in bedrooms and upper storey, tiles elsewhere. Polyurea floor finish in the secure private garage.
  10. Air-conditioning to living area. Ceiling fans in all bedrooms and on patio. Little wasted space.  Internal stairs are hidden from main entrance.  The higher the ceilings, the better.

I may have missed something.  Hey, I often miss a lot.  But this list is a good start.

Matusik Better Apartment Buying Guide

There is little doubt that parts of Australia – and especially Brisbane – are heading towards apartment oversupply.

This oversupply is mostly in big buildings, with few points of difference.

Yet, there is an opportunity to buy well when it comes to apartments over the next couple of years.

It really comes down to what you buy; how much you pay and how long you hold it.

The wish list below is exactly that.  Not everything can be found in the one place.  But it is our starting list when it comes to reviewing an apartment project or product.


We don’t believe in picking winning or losing suburbs when it comes to property.

Our experience is that a buyer isn’t buying a suburb, but rather a property within it.

Foremost should be:

  • The property itself
  • The price paid
  • The conditions of the deal

Whilst location is important, it matters more about what property you buy.

For example, the Gold Coast might have strong base indicators, but an investor could (often, in our experience) buy the wrong property; pay too much and not get the most out of a sales negotiation.

Buyers need to also buy a property that suits not only today’s local housing demographic segments, but those likely to occur in the area in the future.  Very little property commentary adequately considers this.

So on that note, what to buy?

Given recent events, we think it is timely to revisit our rules when it comes to better apartment buying.

General parameters

  • Buy smaller and/or staged developments
  • Limited chance of being built out
  • Good local amenity and attractive ground plane i.e. not on a major road
  • Signature architecture – something that stands out from the crowd
  • Low to medium building height; preferably no more than eight storeys
  • Few apartments per level, best if limited to eight
  • One lift per maximum of six apartments
  • Disabled designed (if you can find it)
  • Single loaded or apartments that allow cross ventilation (corner or end apartments)
  • ESD provisions to help reduce energy bills
  • Good sense of entry and foyer space
  • Adequate space for garbage bins, designed for easy council removal
  • Low to medium body corporate fees –remember, these include building insurance
  • Must have owner-resident resale appeal, either for a young or older demographic

Base product

  • Clear zonal living – private versus living/public space
  • See ‘hero’ shot on, or soon after, entry
  • Two bedroom with two bathrooms
  • One secure car parking space, better if two
  • Basement and bike storage
  • Equally sized bedrooms, physically separated from each other via bathrooms or distance
  • Equally appointed three point ensuites
  • Galley kitchen with a view
  • Well defined space for internal dining and living functions
  • Separate or enclosed laundry with storage
  • Walk in robe space in master bedroom
  • Room for desk/study nook in bedrooms
  • Fully covered balcony that comfortably sits four to six people

Important inclusions

  • Plaster board ceilings with LED lighting
  • Sufficient lighting in kitchens and ensuites
  • Stone bench tops, quality appliances, fixtures and fittings
  • Air-conditioning to living and master bedroom
  • Ceiling fans to all major rooms/balconies
  • Carpet in bedrooms, timber/tiles rest
  • Secure building – key card swipe access
  • Broadband or NBN internet access
  • Pets allowed 

End note

Why two bedroom – two bathroom as a minimum?  Because more tenants are sharing and well-designed two+ bedroom apartments mean more rent and a higher rental yield.

Also, a couple (as an owner-resident) can live in this type of apartment.  It provides enough functional space and some room to escape each other.

What Makes A Housing Boom?

Property spruikers are at pains to outline that because one area is cheaper than another, it must be a better buy.  Take Sydney versus south-east Queensland (SEQ), for example.

Some folks have been calling for – and still are – a SEQ real estate “boom”.

Yet, the latest figures show that dwelling values have risen by about 14% across Sydney and Melbourne over the last 12 months and, despite “boom” calls over several years now, SEQ’s annual growth rate remains well below the rate being experienced in our two largest cities.

It’s true that much of SEQ is in a better position on the property clock than Sydney and Melbourne, so things should continue improving.

It is also true that SEQ typically follows the Sydney/Melbourne cycle and receives buyer interest from down south due to price and rental yield differential.

But is it realistic to label SEQ as Australia’s next “boom” area?

What makes a market boom?

Let’s look at a few of the things that we think need to be happening before a place “booms”.

Population growth

First of all, the “boom” area has to be expanding.  More people should want to live there.  Population growth should be expanding.

Whilst SEQ’s annual population growth is improving, net interstate migration to Qld is still lacklustre and is very unlikely to bounce back to the levels seen during the late 1990s-early 2000s.

Why not?  Because Queensland, and many parts of SEQ, are not creating enough new jobs.

Employment growth

The second thing that needs to happen for a place to be labelled a “boom” town is that jobs, and lots of them, are being created.

Yet the baton change from mining to non-resource based employment is having a negative impact on Queensland’s economy.

Sydney and Melbourne are creating, and are projected to continue creating more new jobs than SEQ.  Sydney and Melbourne’s continued residential performance is being helped by these new jobs.

Resource-based jobs – in fact, lots of them – were being created in the early to mid-2000s, which was the last time the Queensland residential market went through a residential “boom”.

Tight supply

Also, housing supply – both existing and new stock – needs to be in tight supply before a residential market can “boom”.

Whilst undersupplied a few years back, some parts of SEQ are already struggling with its level of new and resale residential supplies.  The region’s vacancy rate is increasing; rental growth is now flat and the amount of stock for resale is on the rise.  This is especially the case for inner Brisbane apartments.

In simple terms, an increase in supply does place a cap on potential price growth, plus how far rents can increase.

Unvalued housing

Our experience is that housing needs to be a “steal” at the start of a potential “boom”.

Whilst SEQ values are less than Sydney’s and Melbourne’s, housing isn’t cheap in SEQ, when measured against local metrics – housing costs are far from a “steal”.

It was much cheaper to buy or rent in SEQ in the late 1990s/early 2000s – the last time this area experienced “boom”– like conditions.

Right demographic mix

Finally, an area needs the right demographic mix in order to help fuel a “boom”.

SEQ is facing a large demographic shift over the next decade or so.  In short, this shift involves an increase in the size of the downsizing and early retirement markets, with a contraction in the number of households upgrading their housing.  Also, fewer young people are moving to; or staying in; Queensland in general.

As people age, they spend less, not more, on housing.  Fewer upgraders in the demographic mix places a natural break on generic dwelling price growth.

The SEQ demographics were quite different 15-odd years ago – i.e. the start of SEQ’s last “boom”.

Households upgrading were a dominant market segment back then, helping to drive home prices higher, as this buyer group spent money in anticipation of future earnings; and as they tried to outdo “the Joneses” next door.

This was pre-GFC.  Post that event, quite a few older SEQ households are still licking their financial wounds; most remain cautious and are reluctant to start a house price bidding war.

X Factor

There is always something more – beyond the short list above – that drives a market to “boom”.

In Sydney and Melbourne, whilst many still want to deny such, this X Factor has been overseas buying, much of which is indirect, via friends and relatives already living in Australia.

In SEQ’s past, the X Factor was high paying Queensland resource-based jobs.

Property Snake

We live in a disinflationary world and the main worry is that this could extend to deflation – which, of course, means falling prices and much more.

There is monetary policy; but there isn’t much money in the bank anymore to pump prime out way out of the any coming funk, so the cash rate is set to drop further.

This is likely to extend our current property cycle, but not forever.

Sooner or later, we are very likely to face a property snake.

And just like in the board game – which is really based on luck – some might be able to fluke their way out of hitting a snake on the way up to the top square, but most won’t.

The game just doesn’t work that way.

What we face in coming years – which, when combined in even the slightest configuration, is likely to have a negative impact most on property – includes:

  1. Disinflation and most likely deflation
  2. Limited improvements in liquidity, even if we start printing money
  3. Increasing financial regulation
  4. Highest levels of household and government debt
  5. Changing property taxation
  6. Little noteworthy government assistance
  7. Falling population growth
  8. Aging population
  9. Tightening and policing of foreign ownership rules
  10. Baton change economy
  11. General economic disruption
  12. Rising unemployment and high underemployment
  13. More part-time than full-time new job positions
  14. Little or no wage growth (falling wages in real terms)
  15. Low housing affordability
  16. Weakening world economy
  17. Potential Chinese economic correction
  18. Overbuilding (especially of the wrong product)
  19. Government deficits
  20. Potential loss of our AAA credit rating

Have a quick go at marking off those on the list that won’t apply in the near future.  It is a short list indeed.

Exactly when we hit the snake is very hard to tell.  But with each roll of the dice, the chances increase.  We have very little wriggle room left on the board.

For those who were prepared and knew what to look for, past property slides presented great investment opportunities.  It doesn’t have to be all doom and gloom.  But what you buy and how you work your asset becomes paramount.

Property Ladder

Over the last twenty years or so, we have seen our dwelling prices increase something like threefold, while rents have risen by more than double.

Whilst property fortunes have fluctuated over that time, in general, it has been an upward and quite lucrative path – a property ladder, as many correctly described it.

What drove the property ladder during this time includes:

  1. Inflation
  2. Falling interest rates
  3. Increasing liquidity
  4. Financial deregulation
  5. Relaxed property taxation
  6. GST on new property
  7. Government handouts and assistance
  8. Strong population growth
  9. Baby boomer cohort
  10. Loosened foreign ownership laws
  11. Change from one to two income households
  12. A strong China and Aussie resource boom
  13. Strong wage growth
  14. Low unemployment
  15. Affordable housing
  16. High rental yields
  17. Hilmer and other government reforms
  18. Introduction of regional town plans
  19. Under-building
  20. Government surplus

It is a convincing list and it is little wonder that dwelling prices and rents rose so much over the last two decades.

Now, revisit the list and tick off those that no longer apply.

Better still, have a go at marking off those that you think will apply in two; five or even ten years’ time.

We will let you draw your own conclusions.