Avoid a negative property decision
The property market isn’t dead, if you know what to look out for, according to property economist and principal of Suburbanite, Anna Porter.
MS Porter has shared her growth accelerator strategy for investors looking to capture potential in a falling market.
“Investors need to look for a strong foundation of economic drivers, good population growth, good job growth, strong market demand for property and employment diversity is really important too,” Ms Porter insists.
“This can’t just be one single employer or industry and speculating growth in a particular suburb based on reports of a new factory or business hub opening is also to be avoided.
“Investors should look for a good pipeline of infrastructure either in the area or coming to the area to create strength in the economy which will ultimately lead to growth.”
Ms Porter believes property markets don’t grow on their own and when economies grow on a local level, they pull the property market through.
A strong economy results in a strong property market but with infrastructure as a key driver, it is important to evaluate the impact individual projects will have on the property market.
“When evaluating infrastructure projects, look closely at the key drivers like jobs created off the back of the project be it direct employment or indirect through the supply chain.
“In turn, this will generate interstate migration, population growth and economic stimulus to the local business sector.
“This drives price growth in the property market and rental demand, without these key elements, projects have very little short term or immediate impact on the market and are better considered as a longer-term vision for the liveability of an areas.”
Ms Porter has seen an increase of investors taking a speculative approach and land banking in areas with little knowledge of where and how reported infrastructure will roll out and warns strongly against this.
“This can be a risky strategy as a major road project can have a positive impact in many regards but if your land is in a noise corridor or will later be impacted by access to main roads and freeways adjacent then this will negatively impact your property,” Ms Porter said.
“Too many investors are jumping into deals without all the information readily available.”
Porter also suggests investors should look out for the key statistics as a self-health check on the market.
“The key statistics are vacancy rates, days on market and the 12-month growth profile,” she said. “When looking at vacancy rates, you want these to be low, at least under three per cent and under two percent is even more ideal.
“Vacancy rates of five percent or higher are an indicator the economy is struggling.
“Investors want to be looking out for days on market also, if it takes a long time for people to buy property on average, that means the market is not seeing the buoyancy it needs to see in the demand sector, aim for under 100 days on average when evaluating this statistic.”