It’s likely to be a great year for property with the prospect of capital growth looking very good at the moment, which is why many investors are eagerly entering the market.
But with the lure of potential gains, there is an added risk of complacency.
Investors need to be vigilant with their investment decisions, particularly when it comes to choosing where to invest, as some areas will inevitably perform better than others.
Pick the right areas and you could accelerate your path to financial freedom; make the wrong decisions however and you may find the market runs away from you.
So, how do you pick the areas that will lead the way in a rising market?
Here are 8 valuable tips:
#1 – Ask this powerful question
While property investing may at times seem complicated, asking yourself this one simple question will go a long way to helping you pick a winner.
When evaluating an area, ask yourself what will cause demand for this area to increase relative to supply.
If there is a clear answer, you are on your way to uncovering a potential hotspot.
#2 – Look for signs of gentrification
Look for areas with signs of positive change, such as people spending money on renovating and extending their homes, or the emergence of fashionable new shops.
These can indicate that the demographics of an area are changing, which could signal imminent growth.
#3 – Avoid the population growth trap
While Australia’s strong population growth is one of the main drivers for the rising real estate market, don’t fall into the trap of thinking areas with high population growth automatically make good investments.
In reality, most areas with high population growth are on the edges of the metropolitan area and have an abundance of free land, which will constrain capital appreciation.
#4 – Infrastructure equals growth
Infrastructure is always a major driver for price growth because it increases the attractiveness and amenities of particular areas.
The benefits of infrastructure, however, are generally only recognised after the new infrastructure is in place, which means buying before this happens can generate excellent returns.
#5 – The location
Location should always be an important factor when choosing where to invest, and it’s wise to look for areas with more than one location advantage.
Consider the area’s proximity to the city, major employment areas, the water, and key amenities.
Is the area within a sought-after school zone? Is it adjacent to a prime suburb and likely to benefit from the ripple effect?
Does the area have good transport options?
#6 – The land
It’s important to choose a property with a high proportion of value in the land, which is the part of the property that will appreciate.
Properties with the majority of their value tied up in the building are destined to underperform as the building depreciates.
#7 – Follow the money
One way to locate an emerging hotspot is to follow Government spending.
When Governments are spending money beautifying main streets and installing new infrastructure it can give an area that additional boost.
Similarly, spending by the private sector on things like shopping centre extensions can also cause demand for an area to increase.
#8 – Zoning changes
Finding areas that are being rezoned can prove extremely profitable for investors.
When areas are zoned for higher density it creates opportunities to develop property and subsequently increases the value of the land.
Buying an investment property is a big step and not one to be taken lightly.
As the market heats up, it’s important that you avoid the trap of thinking that “any property will do”.
By understanding the various factors that drive property values, and getting professional advice, you can make the most of the rising market and set yourself up for the future.