How to spot a growth suburb
Right about now, it seems almost every suburb in Australia is experiencing rising property prices, but how do you predict which suburbs will experience price growth in the future?
It’s a good question, and one that’s often answered with some serious research prior to making a purchase.
So, whether you’re investing or seeking capital growth in the property you intend to live in, here are four clues a suburb might be primed for property price growth.
A little due diligence
Regardless of why you purchase a property, it’s nice to imagine that home will be worth more in the years to come. And generally, property has a pretty good track record in Australia when it comes to increasing in value.
That said, a little due diligence prior to purchasing goes a long way.
For example, every property buyer should look at things like employment statistics in a region, along with any intended infrastructure for the area, and the current amenities available.
All of these things indicate what a suburb or area is primed to do in the coming years, but beyond that there are also some key statistics to examine which could indicate an area is set to increase in value and property prices might rise.
Days on market
Days on market is all about measuring how much inventory is available and speaks to supply versus demand.
A balanced market is around 60 days on market. Anything less than that indicates property is in demand and there’s competition for each property that’s for sale. Anything higher than that is a sign of surplus stock.
So where do you find this figure? Well, places like PropertyValue by CoreLogic is a pretty good place to start.
Historic capital growth
This one’s a little more contentious, but there’s a lot to be learned from the historic property prices within a region.
At the moment, lots of suburbs will indicate rising property prices, but it’s more important to look at the long-term trend.
For example, property prices might have grown 10 per cent in the past 12 months, but what have they done in the longer term – say over the past 30 years?
If there’s a general price growth trend that exceeds standard inflation, it might indicate this is an area where values are likely to continue to rise into the future.
Rental vacancy rate
The rental vacancy rate is a key figure to consider not just as an investor but also as an owner/occupier, because basically it indicates how much people want to live in an area.
Generally, a 3 per cent vacancy rate indicates a balanced market. Lower than that indicates rental properties are in short supply, higher than that might offer a clue that there’s unoccupied rentals languishing on the market.
Rental yield
Rental yield offers an insight into where the property market cycle is sitting in the present, and it’s basically a calculation of the current value of the property versus the percentage of income it currently commands on the rental market.
The thing with rental yield is that it’s usually at its highest just before property values peak, meaning that area is in demand as a place to live.
The final word
These are just four factors to consider as you gaze into the crystal ball of what a property market in a specific region might do in the future.
There are, of course other elements at play, including potential property supply coming to market, such as new land releases, and employment factors.
The bottom line is, it pays to do your homework prior to making a purchase, particularly if you’re in the property market to enjoy capital gain.
Looking to buy or sell?
If you’re considering buying a property or perhaps selling your existing home, why not chat with one of our friendly Eview agents on 1300 438 439?
You can also view our list of current off-market properties here.
