As investors, buying property that is set to perform from day one of purchase, is fundamental to maximising your investment. Find out how to pinpoint suburb HOTSPOTS set for imminent growth in September 2017.
As investors, buying property that is set to perform from day one of purchase, is fundamental to maximising your investment. So how can we find LGAs/suburbs set for imminent growth?
We need to see a number of primary factors coming together into alignment to create that perfect buying point.
Let me explain:
Industry observations (made by experts, advisors and in news articles) tend to focus on secondary indicators - the underlying causes behind property price increases when trying to predict imminent growth.
So what are secondary indicators of growth? Secondary or causal data includes factors such as job growth, infrastructure spending, new shopping centres, population movement, to list a few. Real life examples might include a train line announcement, or major infrastructure spending on a mine, increasing job figures or positive mass media sentiment.
Focussing on these secondary factors, however, I believe is setting yourself up to fall short of the mark. If, for example, you are only monitoring job growth data, as a means of finding an area to purchase, you are only looking at part of the picture.
While you might land in a suburb set for growth, without looking at the primary indicators of likely and imminent growth, it is improbable that you will know WHEN exactly to purchase. To achieve outstanding growth, the WHEN is crucial.
Primary indicators, including factors such as sales volumes, rent per week, yield, Days On Market (DOM) are much more reliable in locating standout growth areas and enabling you to pinpoint exactly WHEN growth is likely to occur.
Another way of looking at secondary and primary indicators is cause (secondary) and effect (primary)– we only care about the effect. We want to track the actionable PRIMARY indicators of imminent growth - indicators that are not one or two magnitudes removed (i.e. job growth) but directly related to the local property markets in each LGA and suburb combination.
When monitoring or collating primary indicators – we want to look at the entire country, tracking changes to these indicators on a DAILY basis. There is little point in monitoring these at quarterly intervals, as we want to position ourselves reliably just before major uplifts in value and beat the masses (we want to use the demand of less sophisticated investors, coming into the market at a later point, to deliver this additional growth).
To illustrate the alignment between primary metrics and HUMAN Behaviour, demand and growth, let's go through a case study example:
People want to move to an area for the first time. They might be chasing a job, they might be attracted to new amenities - shops, schools, transport, a marina or university - but they will often rent first. They'll put their toe in the water. So the first thing you will see is increasing rental demand.
When analysing a potential high-growth suburb, we want to see rents starting to spike - this uplift happens very quickly. We then see yields going up in line with rents. If rents are going up and prices have already started to move, we won't have yields increasing at the same time. But if rents and yields are increasing at the same time, it's a very powerful buying signal.
Then, looking six months down the track, people who are renting, and living in the area, and loving it, say, "I'm going to buy."
Sales volumes start spiking. There may be opportunistic developers coming into the market, and sales numbers might be increasing. We then need to dig a little further to rule out supply side risk:
If DOM are steady or decreasing, it is a further solid indicator that the market will start tightening and demand is out pacing supply.
The example above is a very simple one demonstrating how the stars can align to predict imminent growth. If you would like to learn more about predicting imminent and outstanding growth, tune in for our September Hotspot Masterclass Webcast Thursday, September 7th at 8 PM AEST.
Ripehouse metrics
Build around these key PRIMARY indicators; The Ripehouse research engine continually analyses 121 metrics considering various combinations at different times to form our suburb growth recommendations.
To date, at Ripehouse our results have been outstanding. Our monthly predictive reports generate almost 15% annual capital growth in the first year after purchase (on average). With the right property and negotiation, some investors are achieving an average of 20% capital growth across multiple purchases in their first year of using the software.
Once again, be sure to tune in for a September Hotspot Webcast Thursday, September 7th at 8 PM AEST for a deep dive into exactly why, how and where to buy in September 2017.
See full article here: http://www.apimagazine.com.au/property-investment/the-10-key-factors-when-selling-your-home
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