It’s not necessary for your property to be in a so-called “hotspot” to achieve capital growth, but it can be helpful when you’re trying to build up your portfolio because you can potentially recycle your deposit faster than in a slower moving marketplace.
A hotspot has the same drivers pushing it towards growth as does a so-called “normal growth” marketplace… it’s just taking place in a shorter timeframe.
WHAT TO LOOK FOR
Although all market drivers are important, one particular influencer – infrastructure investment – stands out because it reveals where money is being spent, jobs are getting created and of course property values are set to increase.
So for example, when you see a company like Woolworths buying and building in an area you know they’ve done the research that shows growth will happen – enough to support their expansion into that location.
New roads being built, new or expanded airports, hospitals, etc., are also good indicators of growth as these projects are a direct result of an increase (or projected increase) in demand.
Ask the following questions to determine if a particular suburb could be a future hotspot:
1. What is the current investing climate?
What does the market look like? How long is it taking for properties to sell? Are local investors buying in the area?
Look for areas where the suburb has experienced growth of a solid 2.5% growth per quarter, totalling 10% a year. This indicates the market should begin moving in the next one to three years.
2. Are incomes increasing?
You can determine this by looking for the percentage of individuals who are in high paying growth industries such as medical or tech.
Take a look at property prices. Can their salaries support the rents as they are now? Could they afford them after any increases?
3. Is there a ripple effect?
Are nearby suburbs undergoing change that is influencing – or soon will be influencing – the suburb you’re looking at? If market drivers, amenities, etc. are similar then it’s possible your suburb will grow as well.
4. What kind of individuals and families live in the area?
Age, profession, marital status…all of these demographic factors play a part in what type of properties will do well in a certain location.
Find out what the majority of the demographic want; close to every conceivable amenity, near quality schools…whatever the majority of your population desires will likely be the better performer.
5. Where does it lie in the property cycle?
Look for suburbs where growth was stagnant for some time, but is now growing to the point where the yields are at least 1% to 2% over the past 5 year average.
This could indicate the market is headed upwards.
These are just some of the questions you’ll need to ask when researching possible growth markets. At Positive Real Estate, we have helped thousands of Australians learn proven tips and strategies to build their portfolios safely and effectively.
Click here to register for our next FREE Property Investor Night to find out how you can create financial freedom through investing in good growth properties.
HAVE I MISSED IT?
The first thing you’ll notice when a market is starting to wane is that rents begin to compress.
Calculate what the rents were, determine the yield variation and compare that to what it is now. If they’re dropping, set that suburb aside and look for another.
IS IT GENTRIFICATION OR URBANISATION…AND DOES IT MATTER?
Urbanisation quite often leads to gentrification, hence the reason why we pay attention to private and public infrastructure works.
The idea is to keep a keen eye on market drivers so that you can spot when a market is at the beginning of its upward swing. To get the best deal you need to buy when the market has resigned itself to the new, lower price point and doesn’t recognise the beginning signs of growth.
Like to find out more?
Register to attend our next Property Investor Night.
At these FREE events held all across the country we discuss where the growth markets are right now, and share ways you can navigate your way to financial freedom through investing in property.
Seats fill up fast, so book yours now!