Investors and first home buyers are often searching for the next growth corridor to ensure a strong return on investment by way of rental yields and capital growth. But how do you really identify an area that’s destined to grow?
Cut through the hype and identify the growth opportunity
1. Look for areas that are experiencing change
These are areas that may have had negative reviews in the past, however, are seeing a change in demographic that is also shifting the landscape of the area.
- Keep up to date with property prices and how they may have changed over a three-year period.
- Look for signs of new houses or renovated home popping up in the area.
- Look for new cafes or retailers launching in the suburb.
A great example of this is in the West of Melbourne where new suburbs are in fact being developed with developed infrastructure and retail precincts. As a major growth corridor in Melbourne, it’s one to keep an eye on.
2. Look for a domino effect on other suburbs
If you can’t quite afford to buy into a high growth area now, you should consider the surrounding suburbs. This requires timing, so you’ll need to keep abreast of suburb performance in order to be able to make a calculated decision.
Tips for finding areas before the domino effect starts are:
– Check property values by reviewing the median prices of adjoining suburbs;
– If there is more than a 5% variation, chances are the suburb next door will be playing catch-up;
– Monitor closely median price trends on a quarterly basis. Once you are certain the cycle has kicked off, look for properties within your budget that are as close to the growth as possible.
3. Understand the rules of Supply and Demand
The supply vs demand ratio of properties in an area is a key driver of price growth. If there is no capacity to build in the suburb or housing is simply not available, yet demand keeps on growing, prices will continue to grow.
Tips for finding high-demand, low-supply areas:
– Look for areas where the rental yield is rising. This indicates that an area is popular among renters. When renters become homeowners, they also tend to buy in the same area they’re renting in.
– Look at the demographics of people moving into the area.
– Look for areas with rising population. When combined with other indicators such as rising income and low supply, this is a good indication that property prices will grow in the area.
Speak to Financial Scope Melbourne today about your next move.
Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.
