We all know the age-old saying Location, Location, Location!! But what do you really need to look at when trying to find the right location?
Buying in the right location is essential to maximising the future capital growth of your property. Yet regularly research on the subject barely scratches the service, either because people don’t know what to look for or where to find it. Often people look for the top-performing suburbs of the previous 12-months and base their decision on that. At this point, it is often too late though. Buyers often get anchored onto 1 singular piece of information about a location. Such as, “There’s a new train station being built”, or “New infrastructure is being planned”. These are obviously good things, but they don’t paint the whole picture about a location and its prospects for future capital growth.
To truly understand what is going on in an area here are a few key areas that will contribute towards likely future capital growth, both short and long-term.
Transport
The ability for residents to access key services, amenities, and employment hubs easily through public transport and car are essential to buyers and tenants alike. Transport isn’t talking about just one key piece of infrastructure, understanding all aspects of a location’s accessibility through different modes of transport must be a priority as this will increase the appeal of the location.
How does Investeps Property measure this?
Through mapping tools, we measure the time taken and distance to the CBD and other employment hubs along with key local amenities to assess the number of quality transport options available to locals.
Services
The desirability and demand for housing in locations are driven largely due to the services available in the area such as quality schooling, cafes, restaurants, and other lifestyle choices. The easier these are accessed, particularly by foot, the more desirable.
How does Investeps Property measure this?
Aside from visiting and understanding the areas we use software to calculate scores for these key services. Using these scores to paint a better picture of the experience locals have.
Amenity
Amenity is defined as the pleasantness and attractiveness of a place. For residential dwellings, this incorporates factors such as the number of main roads, noise pollution, the density of the area, access to parks, walk paths, and open public spaces.
How does Investeps Property measure this?
Again, through being on the ground we get a sense of location and its tranquillity which is verified through the use of our software tools. We also consider owner-occupier ratios, zoning, and planning laws as well as crime rates. Other unique features must also be accounted for such as flight paths and access to beaches, rivers, and national parks.
Employment
Employment opportunities are arguably the biggest driver of sustained capital growth. Australia is a big beautiful place with an abundance of stunning places to live but people can’t afford to live where there is no work available. Locations with access to high paying jobs often receive stronger capital growth due to higher desirability. These locations are usually well-established suburbs for this reason and are often more resilient with a constant demand for the properties in all market conditions.
How does Investeps Property measure this?
Through analysing government statistics and data including median household incomes, current and historic unemployment levels a greater picture around job opportunity is created.
Average Household Income Trends
Analysing shifts in household incomes can indicate many things about a location’s growth potential. If incomes keep rising it can mean higher-paying jobs are becoming available for people in the area, it can also mean a shift in demographics for an area such as the number of people per household and changes in average age. Understanding these factors can help determine whether or not it’s likely this demand driving trend will continue.
How does Investeps Property measure this?
Through analysing government statistics and data this data can be analysed and broken down to explain and educate our clients.
Gentrification
Gentrification is the transformation of a location from something that was undesirable into a sought-after location through renovation and improvement of services. Gentrification has the ability to turn run-down suburbs into thriving upbeat areas. It usually occurs to locations that have a desirable locality but are simply undercapitalised or have seen changes in the predominant zoning, such as a change from factories to residential that has occurred across many areas within Australian capital cities. Consequently, demand rises and a jump in prices occurs. This often sees great capital growth over the short-term but also establishes the suburbs to see consistent long-term growth due to the initial demand for the locality to see upgrades.
How does Investeps Property measure this?
We follow and identify gentrifying suburbs and suburbs with the potential to see gentrification by knowing the areas we service. Understanding the streets, zoning, and keeping up to date on rezoning in the suburbs allows us to track gentrification. We use this local knowledge in conjunction with ABS statistics on household composition and income to track changes that might see an area changing.
Population Growth
Population growth has been consistent in Australia for a long time and is greatly influenced by our immigration policy. This is not likely to change any time soon as our growth in GPD has been consistent with our population growth over recent years, and this is not something governments would like to see change. Simply supply and demand analysis determines the price in economics, and it is no different for residential property. Many factors affect the demand for certain areas however the biggest demand driver is population growth. This becomes even more critical in established suburbs where there is limited to no supply of new land, creating sustained increases in demand for, particularly desirable locations.
How does Investeps Property measure this?
Analysis of government statistics surrounding immigration, inter-state migration and intra-state migration helps understand the anticipated demand for properties within a region.
Historical Performance
Past performance should never be taken as given for future performance as many micro and macro-economic factors can change historical trends. However, in property long term performance of established suburbs has proven to be a useful indicator of future growth. This isn’t to say that the historical numbers will be repeated year on year, but the factors that make a location in demand rarely change too much in a short amount of time.
How does Investeps Property measure this?
We track capital growth for both houses and units per annum over a 30-year period in each suburb.
Future Supply
Buying in established suburbs that are surrounded by other established suburbs will mean there is a limited land supply for new construction and building. Understanding what construction is in the pipeline can help determine what type of housing stock will be coming on the market soon. What that number of dwelling type is as a percentage of all comparable stock in a location will also determine what levels of competition there is. The less competition there is for your property in a location, the rarer it is and the more likely it is to see above-average capital growth.
How does Investeps Property measure this?
We use development software and local council planning and development portals/ maps to research and understand what stock is in the pipeline to be developed, and what zones allow for further development. We then measure this against the population growth forecasts to understand whether there will be an over or undersupply.
Current Market
The current market conditions will help predict short-term capital and rental growth. Property is a cyclical asset in Australia and each local market has its own independent cycle. Timing the market wrong in a location can give a blow to a buyer’s equity position after purchase that can not only lead to issues with lenders but also set you back years on your investment journey. But buying the right properties in locations with strong fundamentals like the ones outlined above can help reduce this risk and often avoid market downturns all together.
How does Investeps Property measure this?
We look at a variety of current market indicators including vacancy rates, clearance rates, available stock, and vendor discounts. The best way we get a sense of
this though is through our constant presence in the market and talking to our endless contacts in the market, giving us a true sense of where the market currently is.
It’s important to understand that short-term pressures and trends do not affect long term growth potential. That’s why we have an extensive list of criteria for both location and property that we use when making judgements on property's potential. If you want help selecting the right location and property, feel free to talk to us and see how we can help you meet your property goals.
For more information or need help to find the right property for you, contact our team now!
Whether you already own property or you’re looking at buying your next home or investment property here’s 3 ways, we can help you:
Strategic property advice – Allow us to build a Strategic Property Plan tailored for you and your family. Planning brings the future into the present so you can do something about it! This will give you clarity, direction, results and more certainty. Click here to find out more
Buyer’s agency –Our highly skilled and trained on the ground team in South East Queensland brings you years of experience and perspective. We’ll help you find your next home or investment property. Click here to find out more
Property Management – Our stress-free property management services help you maximise your property returns. As Qualified Property Investment Advisors, we will ensure you understand how your property is tracking from all aspects, value not matched in the market. Click here to find out more
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