The key fundamentals of investing in the Australian residential property market are where, what and when to buy. These fundamentals are driven by macro and micro indicators.
Macro Indicators tell us where to invest and looks at an area’s;
and private infrastructure investment.
- Population growth.
- Economic health and employment
- The supply and demand of property.
Micro Indicators tell us what to invest in and look at a region’s;
- Access to transportation.
- Rental yields.
- Design quality.
- Projected capital growth and rental income.
Now we will look at each of the fundamentals in more detail to help you understand how they help in deciding where, when and what to buy.
The government and private enterprise spend billions of dollars each year on roads, transport, hospitals, mining, resources and more. Property investors need to look at what they are spending the funds on and what impact the infrastructure has in those areas in the long term.
The Australian national population growth rate was 1.7% or 394,000 new residents in Dec 2012. Take note of where these people are moving to. Are they capital cities, regional cities or regional areas? We also look at interstate migration, which is generally associated with employment opportunities or lifestyle choices.
Economy and Employment
What is the diversity of industry? Consider what business and industries are located in the area you are investing in. Does the area have a cross-section of industries that can support current and future employment? Or is it reliant on one main industry?
Supply & Demand
Is there an oversupply or undersupply of residential housing? If there is an undersupply, you are likely to see increased rental income and improved cash flow for an investor. In this scenario you will also see a lowering of the vacancy rate. Undersupply could also put pressure on property prices. With an oversupply, the opposite normally occurs for an investor. Rents decrease, vacancy rates increase and property price can decline.
The better the amenities are, the more attractive an area become for people wanting to rent. Look for good employment, schools, shopping centres, medical facilities, sporting facilities and a café lifestyle.
Transport is a very important consideration. Look for a combination of good public transport. Does it service the area well, especially in the exact areas you're looking to invest in?
Rental yields are determined by the supply and demand of property. When investing, what's important is finding the balance between your rental income and cash flow. If there is an oversupply of rental properties, your rental income will reduce. This affects affordability and holding costs for investors.
Look at the price of the property relative to similar properties in the same area. This will give you an idea of the real value of the property. Also consider the likely resale value by looking at the properties that are currently being sold in the area.
Take a good look at the design of the house. Is it practical? Will people want to live in it? Does it have good natural light? What aspect does it face? What is the internal size of the property? This could affect its future resale.
Projected Capital Growth
When you look at macro and micro indicators to help you decide where to invest, you give yourself a strong opportunity to see long-term growth with your property - and can therefore project its capital growth.
Obviously, there are many other macro and micro indicators that you could consider for property investment but with our years of practical experience, these are the top 10 we consider most important.
If you would like to know more about how macro and micro indicators help you decide where, what and when to buy please contact firstname.lastname@example.org