I was once asked by a journalist to explain which research tools I use to make my property investment decisions.
She probably thought I would quote the Australian Bureau of Statistics, SQM Research, Residex, CoreLogic and the like.
While I use these great resources, that’s not the answer I gave.
Here’s what I said:
Most research data tells me what’s happened in the past, but what I’m looking for are leading indicators, in other words I want potential predictors of what will happen in the future.
So I pay attention to:
- Population growth – which will affect demand.
- Construction numbers and future planned projects – which will affect supply
- Demographic changes – I track suburbs where the residents have high and increasing disposable income – I’m looking for locations where owner occupiers can afford to and are prepared to pay a premium to live.
- Employment growth
- Consumer confidence – people don’t make big purchases like a new home or an investment property unless they feel secure in their jobs and are generally confident about the future.
- Finance approvals trends – this is a good “leading indicator” – as many home buyers and investors get finance pre-approval a few months before they intend to buy a property.
The long term destiny of our property markets will be determined by two main factors:
- Demographics – how many of us there will be, where we want to live and how we will want to live , and…
- The wealth of our nation.
In the short term another factor is the availability and cost of credit.
In other words interst rates and how friendly the banks will be.
As I explained above, using Australian Bureau of Statistics data, I look for suburbs where people are able to, and prepared to, pay a premium to live because their disposable income is growing above average.
Then I get to know the real estate markets in those areas by analysing market trends – supply, demand, auction clearance rates, vendors asking prices, days on market etc.
And most importantly by inspecting lots of properties.
Also published on Medium.