Updated: Jan 13
Buying a successful investment is always about buying in the right location that will boom. Unfortunately, no one has the crystal ball, but investing comes not with luck but with your right strategy to buy the right property at the right time before the market explodes. The investors who put their time in to do a bit of research before purchasing the property can create a substantial wealth while doing nothing more than holding their asset for a bit longer time.
You must have seen that there is mention of boom suburbs which comes from nowhere in the media and everybody starts talking about them, and suddenly there is a rush to grab off a piece of that cake. It might seem that these exploding suburbs comes without warning, but there are always some fundamentals that can be applied with a potential to know where the cake is baking.
In our recent article “Are hotspots really hot...?”, we concluded that we should follow the correct methodology to identify the right location for your next acquisition. In this article, we delve into what exact leading market indicators one should look for.
Let’s go through together our top 7 fundamental factors to help you find the market where the upward price pressure is building up.
1. Low Vacancy Rates
You should look for research reports and study the vacancy rates of the given area. The research will help you comprehend whether more people are moving into the area and if it is an undersupplied market or not.
2. Increasing wages
The best way to tell that the salaries are rising in the area is by comparing it with other neighbouring suburbs and various averages. You should look at what cars people are driving in the area? Are there buzzing cafes in the area? Are the front gardens beautiful or are streets strewn with rubbish?
3. Population growth
When it comes to suburbs with exponential potential, you should always look for population growth. A rapid population increase then leads to a competition of new houses, which will further push the rental prices and values of the homes.
4. New Industry and Infrastructure projects
Any new area who wants growth will always welcome a new industry or infrastructure or both. It would be best if you look for councils who are open to the idea of growth. Councils which are undergoing the expansive zoning changes are most likely to experience the capital growth. New roads, rail projects, transport links can suddenly make an area accessible to the CBD and will help in the area’s exponential growth.
5. Decreasing days on the market and High auction clearance rates
The suburbs which are about to explode are likely to have days on the market declining, and auction clearance rates increasing as the properties are picked very quickly. These trends reflect that the buyers’ interest is growing, and soon it should be reflected in the price.
6. Increase in the rents
The increase in the rents will help you understand where the market is going as well. If there is new industry coming in and the local markets are coming with modern cafes and new car showrooms are opening for clients and new schools, then definitely the people will be attracted to the areas. The connectivity of public transport to CBD areas will help attract more people in that area and to get the better lifestyle for their families, the people will come, and there will be a rush to get the rental properties to be part of the beautiful booming new area which will increase rents in that area.
7. Decreasing stock for sale
And last but not least you should always look for the trends in stock for sale. Some research provide stock for sale in each suburb every month in their data, else jump onto property listing sites (like domain.com.au or realestate.com.au). The more the people wanted to live in that area, the more they will compete to get the best stock. This demand pushes up the prices and one of the triggers to make the market explode.
Any of these above leading indicators or triggers, when targeted in isolation, will not help much to find the right location. It would be best if you focused on doing thorough research by using all of these criteria together to zoom in a particular region. Also, note that there are other things in addition to the above factors that should be studied. These factors include but not limited to the demography, investor and owner-occupier split, school catchment, gentrification, diversity in the industry, crime rate and weather. It might sound like much work, but the rewards are massive.
Should you be time-poor to go through the above research properly, feel free to leverage independent buyers agents/consultants out there to help you through your investment journey.
Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years, and aspire to own something similar, feel free to get in touch via email at email@example.com or book an appointment here.
Disclaimer: This article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.