Healthiest property investment suburbs are following the jobs

The old maxim used to be to invest as near as you can to the CBDs of our major cities.

The argument was that this is where all the high value jobs growth was happening, hence why real estate located close to high value jobs will attract the best price growth.

That has certainly been the case in recent memory. Inner city suburbs now command eye watering prices for even the most modest abodes.

Former inner city working class and industrial areas where the professional class once feared to enter (think Sydney’s Balmain, Brisbane’s Newstead, or Melbourne’s Richmond) are now high-end domains where only the wealthy can afford to live. And even for some of them, it’s a struggle.

In the post-1970 Australian economy, CBDs surged driven by growth in what was then categorised by the Australian Bureau of Statistics (ABS) as the ‘finance, property and business services’ sector. I recall as a young researcher in the 1980s and 1990s carefully studying the ABS data for trends in this high growth part of the economy, to understand more about what was driving CBD and inner-city growth.

But times have changed (along with the ABS classifications). Now, sectors like ‘finance and insurance services’ or ‘rental, hiring and real estate’ or ‘information, media and telecommunications’ as well as other ‘administrative’ categories that loosely align with the white collar jobs that once drove CBDs, are now languishing.

The one exception is the category of ‘professional, scientific and technical services.’  This includes occupations such as scientific research, architecture and engineering, computer system design, legal and accounting services, advertising and market research, veterinary services, and professional photography. Only some of these are typically CBD type occupations.

The graph below says it all. Here, the Australian Government’s jobs forecasts by Jobs Skills Australia paint a very clear picture. The fastest growing jobs sector in the future will be health. It vastly outstrips (more than double) the second placed ‘professional, scientific and technical services.’

Ask yourself: “Where are health jobs likely to be?” The answer is “not the CBDs.” These will be suburban and regional jobs.

So the health sector is already massive as an employer and is forecast to get even bigger. It also happens to include a very great number of high-income earning specialists and professionals.

There is almost no job in the health sector that doesn’t necessitate some form of tertiary training or education. Yes, it also includes a lot of underpaid nurses, paramedics and others, but at the other end of the spectrum there are very many health specialists and administrators earning extremely good incomes.

If the forecast jobs growth for this sector holds true, it is potentially going to reshape our cities into the future by pumping a great many more jobs into suburban centres where health and allied health will invariably cluster. And with many of these being high income earners, it could also redraw the map of real estate value.

Accommodation demand set to soar

Already we are seeing heightened competition for development sites near major hospitals or health hubs.

This is not just for consulting rooms, or services like medical imaging, blood pathology and so on, but also for long- and short-term accommodation.

Patients’ families, nursing and other allied health professionals such as visiting specialists are all part of the demand pool for accommodation near hospitals.

You will often also find a major public hospital co-located with a major private hospital. Often, this has more to do with the medical staff (specialists mainly) who work both the private and public system. Co-location means a lot of time saved moving from one to the other. It also makes sense from an emergency point of view. Where you find public and private co-located, you will also find a large cluster of allied professionals and specialists – a list which is too long to repeat here.

The point being that these are in many cases already major employment hubs, which employ a lot of people on high value incomes, and this is forecast to outstrip growth of every other industry sector by a country mile in the years ahead.

That is much like the old ‘finance property and business services’ was in the 1980s, except that it was typically a CBD occupation, whereas health will tend to be suburban.

Will we see the same real estate price impacts around major suburban and regional health hubs in the future? If a suburb has good amenity – or the potential for it – and has the related access to infrastructure like schools, shops, open space and so on, then there is every reason to think suburbs with those qualities located close to major and growing health hubs will grow strongly in the future.