The Owner Occupier to Renter shows you what percentage of properties in the suburb are owned by people who reside in the property, versus the percentage of those owned by investors (and thus are rented). It is generally used to assess the quality of a suburb, with a higher percentage of owners signaling a higher quality of suburb. This is because owners will generally take care of their properties better, improve the value of their properties over time, and be more actively in the local community than tenants. Additionally, as an area grows more attractive, owner-occupiers will pay a premium to live there and over time start crowding out investors. This theory is broadly correct, but its important to understand what is driving this statistic before you assess suburbs on this basis.
There are two main factors here which will create a higher percentage of renters in a suburb:
1. The type of housing within the suburb. Houses are favoured by owner-occupiers to a much greater degree than other property types. Owner-Occupiers predominantly favour houses, townhouses are distributed relatively evenly between owner-occupiers and investors, while apartments are skewed heavily to investors. As such, suburbs that have a higher percentage of apartments and townhouses will have a higher ratio of investor ownership.
2. The age of the suburb. New properties are heavily marketed to investors, and so suburbs with a high percentage of new properties will have a higher percentage of investors. At the same time, these locations are unattractive to owner-occupiers; in the case of housing estates, because of their distance from employment centres and amenity, and in the case of medium-high density apartments, these areas are noisy and congested, and the new apartments are too expensive. Housing estates change over the next 10-20 years, as development within an area slows down and new estates move further out. Investors will start to sell up, and are bought out by owner-occupiers, who are attracted to the suburb due to its relative proximity to the CBD compared to new developments. High-density suburbs rarely change, although suburbs with lower-density townhouses and apartments will become more owner-occupier heavy over time.
What are some examples in South-East Queensland? On the new estate side, we have suburbs such as Redbank Plains, which has doubled in size in the past 10 years, and despite being 90% detached houses has a very high 55% renter ratio. Springfield Lakes, which has almost tripled in size in that period, has 93% detached housing, and a high rent ratio of 49%. Pimpama, which has grown six-fold in 10 years, and has an 80/20 split between houses and townhouses, has a whopping 69% renter ratio. Compare this to the Ferny/Arana Hills, an established area in Brisbane’s inner north-west, which has 92% detached houses and only 16.3% of renters.
If we look at the inner city, we can see this effect again. In the Newstead-Bowen Hills area, the housing stock is predominantly apartments (90%), and the population has almost doubled in the past 10 years. As we’d expect, the ratio of renters is very high at 64%, although tempered down a little by the demand for riverside apartments amongst wealthy downsizers. Just over the river, the suburb of Bulimba has seen much less growth and has a more diverse range of housing, made up of 50% detached houses, 13% townhouses and 37% apartments. It has a lower percentage of renters (41%) to both Newstead-Bowen Hills and the new housing estate suburbs mentioned above, but significantly higher than Ferny/Arana Hills
So what this mean for you as an investor? Owner-occupier/renter ratio is a useful consideration and often does provide a good indicator for the quality and attractiveness of a suburb. However, you must take the age and stock type of a suburb into account, so you can use it as a valid basis for comparison. If a suburb with many new estates has a ratio of <40% of renters, then this is likely to be a positive, while above 50% should be ringing warning bells. Equally, don’t expect popular established suburbs with a reasonable proportion of attached housing to match more suburban established suburbs. You could make the assessment that buying in Ferny/Arana Hills is better than buying in Bulimba because it has a lower proportion of renters, yet Bulimba has been the best performing suburb in Brisbane over the past 25 years. Everything needs to be viewed in context.