What is Ripple Effect in Property Investing?
Lesson from surfing to find the next suburb

Have you ever thought about how surfing can teach us something about property investing? Or something as mundane as the ripple on the water?

You’ll be surprised by how this can be applied to property for investment.

The rippling waves we see when we dip our toes for the first time in the water has a similar pattern to the growth in property price. It flows from one location to another, creating an effect. This concept is known as the ‘ripple effect.’ Generally, the pros in the property market stay in the front of the wave to get the best outcome and best results in the long-term.

Usually, booms start in the prime areas, and it sends ripples out to the neighbouring suburbs. According to property market experts, this is a recurring event caused by the imbalance between housing demand and supply. As an upcoming property investor, you can ride these waves before the pass on by, and if you are keen to do that, you have to get out in the front of it.

So, what is the ripple effect?

The price growth ripples across locations in a property market. It starts from high-end areas towards the surrounding areas followed by the outer regions.

When a huge number of people try to get into the property market around the same time, the property demand goes up. As demand exceeds supply, prices increase, and as a result, the market becomes less affordable. That is why potential home buyers start looking for the best next thing, the areas that have not caught up to the price growth.

But this affordability will not last long. These adjacent suburbs will eventually experience an increase in demand due to people trying to acquire properties there. When the demand exceeds the housing supply, the property prices will go up. And the people will try to find properties further into the outer suburbs.

What are the Ripple Effect Triggers?

Although there’s no way to spot a ripple effect coming for sure, you can have a lookout for these chains of events or phases that help cultivate the ripples across the property market:

· Homeowners trying to flip their first homes and upgrade to larger homes.
· Property investors looking to reap the profits from those areas where the price is growing.
· A large number of first home buyers that are trying to acquire properties in the same area.
· Incoming retirees taking advantage of their existing equity to downsize and keep a retirement nest egg.

How can you ride the wave?

Savvy property investors successfully managed to hitch a ride out of the ripple effect over the past decade in the suburbs across Australia. This is due to homebuyers moving to the epicentre of the country’s small and large-scale property booms and decided that the suburb down the way was good enough.

To do the same, you need to keep an eye on the ripple effect through indices listed above but do it with caution. Don’t make a buying decision solely based on the perception that a suburb will be a path of a ripple. It is just one important factor that makes a property investment successful and not all of it.

Maybe that particular suburb you’re eyeing may not be what the buyers are looking for in the leading suburbs. So as a property investor, it would be best if you looked more closely at the specific growth drivers. Pay attention to whether the neighbourhood has good access to quality schools, leisure facilities, health care, transport, and infrastructure.

If you are a first-time property investor or new to the region you are investing in, this ripple effect trend, you should do your research to invest first. It needs a thorough knowledge of the area and the ground network intact with real estate agents in the area you tend to invest in. If you are not sure where to start with your search, get in touch with Get RARE Properties. We are here to help you.

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 rasti@getrare.com.au or book an appointment here.

Disclaimer: This article is general in nature and does not take into account your situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.
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