Whether you’re shopping for your new home or next investment property, finding the right location is critical to ensuring long-term capital growth. But how do you find a good suburb to invest in? While there is no foolproof formula, we can offer you some tips to increase your chances of investing smartly.
Review sales statistics
Property reports can often show a suburb’s price growth using monthly, yearly and ten-year comparisons. It’s worth using this data to help you determine what stage of the growth cycle a suburb is in – whether it’s peaking, bottoming or nearing a boom. Pay close attention to growth trends – how has the market preformed over the last one, three and five years?
Identify gentrifying areas
In recent years many suburbs once considered poor have experienced a second wind as working professionals move in and improve the suburb’s population. To identify if a suburb has the potential for gentrification, look to the streetscapes for new renovations and take note of price trends over the past two to three years. Also pay close attention to who the majority of buyers are, an influx of young and financially sound buyers in the area is a good sign. The local restaurant and café scene picking up is another.
Supply and demand
Sales might be good, but how much construction is happening in the area? Lots of developers breaking ground could lead to a property oversupply, causing prices and yields to fall. Whereas rising rental yields is a good sign of a suburb having low supply and becoming popular. Generally, the more properties available for sale in a suburb, the more diluted the return on your investment. Instead, try going for established suburbs over new ones. This is because the supply of properties in established locations can’t easily be increased, so as the population grows, so does the demand – forcing prices up.
Follow the infrastructure
It’s no secret infrastructure drives property prices. Access to amenities adds considerable value to a suburb’s property market. Try researching where the government is upgrading infrastructure – it’s almost always a sure sign of the next ‘hot spot’. Is a shopping centre being launched nearby? Has any additional public transport been announced? Usually you can find this information on local council websites.
Settle for second best
Ordinarily, the most popular suburbs have already experienced their market boom and peak, and it could take another several years before the cycle repeats. Investing in the most popular suburbs could mean you’re paying top dollar for a slow return. So, when you start looking for a suburb to invest in, consider the next best option. Look at suburbs nearby that are more affordable. You could find you’re buying into a suburb yet to boom and peak in prices. This is known as the ‘ripple effect,’ where a boom starts with the prime suburbs and then extends out into the neighbouring regions.
Following these tips will help you be on your way to finding the right area to invest in. Just remember every buyer is different with varying needs and lifestyles, so make sure you identify and make them central to your decision.
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