Property Investors are always active in their search for the new growth areas that will bring them a property that will be worth double either in four or ten years’ time.
However, it may be extremely difficult to snare a property at the right price, as you are running at the risk that by the time you hear about these areas, you might have bought the property at its peak.
Check any surrounding suburbs
If you are searching for a particular suburb, as you see potential for capital growth, but it seems to be beyond your budget, then consider looking at any surrounding suburbs. The problem with this is that it requires you to time it well, because if you purchase a property too late, then your capital gains might not be as high as it could have been 5 months ago. If you do time it well and you catch on to the right phase of the local property market cycle, you could potentially double your investment.
The things that you need to look out for in order to time it well involves:
- Trying to buy within 15km of the Central Business District
- Comparing the median house price of each suburb with its surroundings.
- Finding properties that are within your budget.
- Identifying if there is a greater variation then five per cent, if there is then there is an opportunity of snatching a grab.
- Regularly monitoring median house prices (quarterly).
Identify areas that are experiencing redevelopment
There are many areas that have had a bad reputation placed on it in the past, that had high levels of burglary’s drug addicts, and domestic violence, but have changed over the recent years in a good way. The recent change of this could be because new homeowners are moving in and are changing the dynamic of the suburb. A perfect example of this is Footscray, in Melbourne’s Western Suburbs, where property prices have sky rocketed over the past 15 years. What you should look for are;
- Any new bars, restaurants, cafes being opened.
- Property prices, and how they have moved over three years.
- Affordable areas.
- If any new houses are being built or being renovated.
- The demographics of the area, whether it is younger or older population.
Be sure to look out for any large infrastructure that large businesses or state government are planning to undertake in the next few months. There are a number of reasons why this will drive property price up, and rental yield up. Because workers for the job might need to rent in the local area so that they do not have to travel two hours a day to work or more. In terms of house prices, if they decide to build a new entrance onto the freeway, it could potential save time getting into the city, which will drive house prices through the roof.
Supply and Demand is a key economic model that can be used in a number of ways to predict what could happen. In the property market, the supply and demand ratio, can be used to determine the price growth in a particular area. The basics are that if the suburb can no longer build anymore new properties, but demand keeps increasing, then house prices will plummet through the roof. Things to look out for with high demand and low supply areas:
- Find areas that have a rental yield that is increasing (increases every 12 months)
- Find out what the demographics is for the area.
- Find out what the population growth is like in the area. If the population growth is high then demand is likely to be high, and will really drive the price of the properties in that suburb.