Is coffee a driver of property price growth?

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A few months ago, we ran a feature in the (Australian Property Investor) magazine on the importance of walkability. The theory is that areas where it’s easier for residents to get around on foot will have higher property prices. But what about other factors – specifically, a suburb’s café culture?

There’s a buyers’ agent in Melbourne who considers the quality of an area’s café scene to be a big factor in its future growth prospects. When scoping up and coming suburbs, he’ll go order a coffee from a local haunt – if it’s crap, he leaves; if it passes the taste test, he’ll take a look around.

I love coffee more than most people I know. I’ll drink four to six cups of the stuff on an average day. If I haven’t had one by mid-morning, I’ll start to get about as desperate as Lindsay Lohan on day three of a rehab program.

In Melbourne, the coffee capital of Australia, they’re just as nutty about the stuff. In fact, that particular buyers’ agent I mentioned earlier firmly reckons an evolving coffee scene is one sure sign of early gentrification – a prime driver of property price growth.

The importance of cafés is an issue that struck the interest of Melbourne buyers’ advocacy Secret Agent. Its two researchers Jodie Walker and Oliver Lock decided to look at just how highly rated coffee establishments affect an area.

“There are two facts that have become a predominant feature of Melbourne’s culture – food and coffee,” Walker says. “The demand for coffee in Melbourne is high enough for the appearance of new cafés (to occur) on a weekly basis.”

She and Lock aggregated data from Beanhunter, a popular coffee review website, and plugged it into Google Maps. They were able to then spit out a coffee shop density ranking for each Melbourne suburb.

“The suburbs forming the top 10 were all inner-city suburbs, with the exception of Brighton. It’s no surprise that the CBD ranked the highest with 192 coffee establishments. Richmond (39), Fitzroy (38), Hawthorn (38) and Brunswick (34) also scored highly.”


On the topic of walkability, Walker also looked to see how many top café suburbs also posted a high Walk Score. St Kilda, South Melbourne, South Yarra, Carlton, Melbourne CBD, Fitzroy and Collingwood all ranked highly for both ease of foot travel and coffee culture.

It’s difficult to measure the price premium a plethora of quality cafés will attract, but Walker says it’s reasonable to assume that it’d have a positive impact on sale prices.

“Consider Gertrude Street in Fitzroy,” she explains. “Up until 1990, it was regarded as a rough patch and characterised by drugs and crime. It was a cheap area for immigrants and artists to live and still be close to the city.”

That particular stretch of the city began to change over the past decade and a period of transformation was soon in full swing. Now it’s one of the trendiest places to be seen in Melbourne.

“Through the area’s gentrification, the cafés, restaurants, galleries and boutiques along here have brought the area to life and created a desirable atmosphere to be in. Property prices have increased dramatically over this growth period.”

By way of example, there’s a one-bedroom apartment on Gertrude Street that sold in 1996 for $175,000. It sold again six years later for a whopping $669,500. Similarly, a two-bedder sold for $750,000 in 2007 and was resold two years later for $1.01 million.

“Those later periods are around the same time when Gertrude Street became known as a destination for great food and coffee,” Walker says.

The suburb of North Melbourne is in a similar gentrification phase at the moment, she says. While it’s by no means unknown, the area has been off the desired list until recently. Its changing fortunes kicked off with a renewal of the local food and café scene.

People who enjoy good food and coffee may think about the proximity of their future property to quality eateries and cafés, she believes.

“Overall, café density, café quality, transport and walkability are all a bit interrelated and can be an asset to any property. Cafés and restaurants can be a factor that attracts people to buy a house in a certain area. Thus, indirectly, cafés add value to the houses in a particular spot.”

So when you’re weighing up a potential investment’s worth, there are a number of things to consider – growth drivers, local economic factors, access to transport and amenities, lifestyle features, property type, future tenant and buyer demand… the list goes on.

It may be worth adding ‘quality café scene’ to the mix too. And hey, testing out that particular quality for yourself is a nice way to end a Saturday afternoon of property inspections.

Shannon Molloy is the deputy editor of Australian Property Investor magazine,