Market Research

As we know, there are many strategies for investing, but there are 3 core areas to which attention must be paid when it comes to property. We always stress vigilance to our clients, especially at a time when we are in the midst of a development boom and there may be a lag effect that will revolve around household formation and vacancy.

It is important not to get caught up in the hype and conduct thorough due diligence. Below is an overview of these areas.

The three areas of research that can help you make reasoned decisions are:

INFRASTRUCTURE RESEARCH

It is important to invest in an area that has potential to affect capital growth in your property. Such areas should have a growing population, strong employment opportunities and a council that is investing in infrastructure for the long term. Even if an area is buzzing with market frenzy, if your research shows that it doesn’t meet these criteria, then it is probably not a good place to invest. Hype cannot overcome the consequences of industry closing down, families moving away and a council that is short-sighted and reluctant to invest in local infrastructure.

RIPPLE EFFECT
RESEARCH

Sometimes a buoyant market can lead you to research an adjoining suburb or area that is et to get caught up in the hype. This is known as the ripple effect. The adjoining suburb to a ‘hotspot’ is still close to all the amenities and attractions, just a few kilometres further away. It may be that you need to cast your net wider when your research finds a good investment area but buyer frenzy is overpricing the properties. Don’t give up on this area completely; just move a little further outside of it. A good way to find a quieter market is through the realestate.com.au ‘buyers on the market’ data. In each suburb, it reports the numbers of buyers looking at each property on the market. If these numbers are high, move on, but not necessarily too much further.

VACANCY RATE RESEARCH

Remember that as an investor, capital growth is important, but so is cash flow. A vital part of your research should be vacancy rates and rental returns. When a market is too hot and competition is pushing prices higher, it is very sobering to crunch the numbers. What is the rental return as a percentage of your purchase price? Is there an oversupply of rental property in the area and therefore a strong possibility that you will experience extended periods without a tenant and be forced to reduce rents to compete for the dwindling tenant pool? This area of your research must not be overlooked.

Don’t allow the hype in a heated property market lead you to take shortcuts.

When interest rates go up (as they eventually will) you don’t want to be holding property for which you overpaid and can no longer afford to keep.

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DISCLAIMER:

Any information in this website and the links provided are for general information only. It does not take into account your personal financial circumstances, needs and objectives. You should consider seeking specific advice in regards to your personal situation, from relevant licensed professionals, before proceeding with any strategy. Premium Holdings Pty Ltd is a licensed real estate company, specialising in property investment, with associations to independent legal, financial and taxation experts.

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