Property Investment Tips: How to pick a growth suburb

By the resi financial blog team, 06 March 2015

Property Investment Tips: How to pick a growth suburb

Investors are always on the look out for the next big thing but with so many to choose from, picking a profitable investment property can seem like an onerous task. Areas that see property prices sprout in a short space of time are often referred to as growth suburbs. Booming values can allow you to gather good returns relatively quickly and open the door to further investment opportunities.

However, there are a few tricks to achieving this goal. Here are are few ideas to help you spot a growth suburb. 

Back to the future

Property reports and sales data are the most common ways to pick out where property prices are swelling, but don't be dragged in at face value. An area that has experienced rapid price growth might be a good option, but consider, compare and weigh up sales trends across a number of areas before you commit.

Check historical records for cyclical trends - a suburb that's booming at the moment might not see the same kind of growth for another decade. Downward trending sales or prices could indicate that a suburb has reached the end of its growth period. Look for areas where prices have just started to increase, or on the verge of a turn around.

Consider supply and demand

Have a think about the balance between supply and demand. This can often be a big driver of property values - high demand and low stock generally result in blossoming prices. 

Real estate agencies release listings regularly, which show how many properties are for sale in a suburb. A high number of listings can be good for affordability, but it can also show that demand is waning. Also contemplate rental yield data - improving yields might show that an area is popular among renters, but be aware that high house prices can influence these results. It's a good idea to compare and contrast the two.

Think big

It's not always about property figures. Gentrification might also indicate a price turnaround is on the horizon, so examine demographics and look out for a growing number of restaurants and cafes. This could reveal that more people with discretionary income are moving into an area, who are able to afford more expensive homes and rent prices.

Look for infrastructure projects or large developments that could influence demand for property in the area, such as a new rail line, shopping centre or office building. Local government websites are a useful source of information in this regard. Properties that are situated near these new facilities can often be a good option, as people enjoy the convenience and lifestyle factors of being close to amenities. 

Keep in mind that best-laid plans can go awry - prospective big projects can suggest suburb growth, but they might not go ahead in the future.

Deciding on the most profitable suburb can sometimes seem like an intricate game of chess. It's best to have your financial options sorted before you commit, so have a chat with a resi loan specialist about your investment loan options.

Categories: Property Investment