The Block 2015: How a hip cafe culture can drive up property prices

Belinda Punshon 12 October 2015 NEWS

The block 2015 how a hip cafe culture can drive up property prices

Whether it’s an organic-inspired menu, a trendy fit-out or a table of macchiato-sipping beards, gentrification (and good caffeine outlets) not only have a positive impact on cafe culture and ambience, but they can also push up property prices.

Delivering three rooms in one week is a mammoth task in itself, but the producers of The Block 2015 decide to throw a spanner in the works with an unexpected challenge this week: to come up with a cafe prototype for the chance to win a $10,000 wad of cash plus the opportunity to have the winning concept rolled out on the lower ground of the Blocktagon. The producers decided to bring out the big guns as they invited the globally renowned design duo Colin McAllister and Justin Ryan to cast their styling eye over Melbourne’s newest cafe concept store, courtesy of the contestants. With just 8 hours to complete the task, contestants were taken to a Port Melbourne warehouse to get their creative juices flowing with the hopes of being crowned the champion. Most of us are familiar with Melbourne’s hip cafe and start-up culture featuring long beards and skinny jeans, but how does gentrification influence property values within inner city suburbs?

Our bustling cafe culture

According to the Mintel International Group, rising demand has increased the number of cafes in Australia by almost 7% since 2009, while turnover at cafes and restaurants has increased by 12% in the past 12 months. With the likes of The Grounds of Alexandria in Sydney and Melbourne’s Rudimentary, Australia’s cafe culture is on the rise - and so are property prices in nearby areas.

Gentrification and property values

Gentrification is a process of urban renewal which generally involves commercial and residential real estate being bought and renovated in "run down" suburbs, where property prices are relatively inexpensive compared to surrounding suburbs. The increase in competition and demand for property puts upward pressure on property values and rents which can cause a shift in the lifestyle and culture of the suburb, as existing residents get squeezed out by more affluent buyers. Many savvy investors and homebuyers seek areas that could be gentrified due to the appreciation of property prices that is likely to result in these precincts. Gentrification can be supported by infrastructure developments as well as government initiatives such as rezoning.

Alexandria, NSW

To demonstrate, Sydney’s Alexandria has recently undergone urban renewal with numerous trendy cafes opening in the past five years which have revolutionised the once-industrial area. The average house price in Alexandria has soared to $950,000 while the median apartment value is $565,000, with annual house price growth outpacing the rest of the city. Since The Grounds of Alexandria (a former pie factory) opened four years ago, apartment prices in Alexandria have increased by 23.75% while housing prices have risen by 15.06%. With multi-coloured roses, watermelon and lemon squeezed juices, talented barristers in The Potting Shed cafe and a petting zoo featuring Kevin the pig, the business has attracted people from all over Sydney, while making life more pleasant and property prices higher for residents.
The Grounds_33

The Grounds, Alexandria

Why should I seek an area based on gentrification?

Suburbs with gentrification potential are always in demand due to the capital growth that can be gained from owning property in these areas in the long term. According to real estate agents, both investors and owner-occupiers are driven by the lifestyle and cultural aspects of an area and this forms an important part of their evaluation criteria when deciding where to invest. However, the challenge that faces investors and homebuyers is knowing how to pinpoint which areas or pockets are due for gentrification. Other areas in Sydney that have recently experienced gentrification include Paddington, Redfern and Newtown; while Melbourne’s Brunswick, Fitzroy, Brunswick and Preston areas have recently gentrified, along with Brisbane’s South Brisbane and West End.

Results from The Block cafe concept challenge

Seeking a cafe concept that was both practical and value-adding to both the Blocktagon building and Youth Sarra, Colin and Justin whittled it down to two winning contestants. They named the final product "Mr Zen"- a combination of Luke and Ebony’s Mr Bisley, and Andrew and Whitney’s A shot of Zen- and each pair was awarded $5,000 cash.

Contestants Concept Outcome
Luke and Ebony ‘Mr Bisley’ barber cafe' Joint winners ($5,000 cash prize)
Whitney and Andrew ‘A Shot of Zen’ Joint winners ($5,000 cash prize)
Kingi and Caro Barber shop with DJ N/A
Shay and Dean Organic cafe and retail space complete with petting zoo & vertical herb garden N/A
Suzi and Voni French patisserie cafe (‘My Darling’) N/A

The next episode of The Block 2015 airs tonight, Monday October 12, at 7:30pm on Nine.

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