Is assessing Demographics an integral part of building your property portfolio?
If not you could be missing the key to building longer term wealth without significant risk.
Understanding demographics could and should be the final piece of the puzzle for you during the decision-making process.
It is certainly something we monitor at Metropole on a continual basis to ensure we get it right.
After all, we are looking for locations that can ride out a downturn and produce above average rates of return in the good times.
Here are my thoughts and what we look for;
Owner Occupier Percentage
I feel that this is usually the best place to start – at the top.
Homeowners are longer term thinkers, they generally wont panic and just sell their home in a crisis.
In other words, they will do whatever it takes to keep a roof over their family’s head.
Investors are different.
They tend to be shorter term thinkers and are reactionary, with more emotion.
As a result, they are more inclined to sell up when times get tough, causing a great deal of downward pressure in the market.
A great example of that is mining towns – markets heavily affected both ways by emotion.
While there is no magic figure, naturally we would like to see more owner occupiers residing in that location than investors.
With that now established, lets drill down a little further.
You see not all owner occupiers are equal and we are looking for a certain type of Owner Occupier.
We are looking for Owner Occupiers in locations where they are not just reliant on one income stream.
They are not living pay cheque to pay cheque.
We look for Owner Occupiers with multiple streams of income, for example;
- Both occupants may be working
- They may receive bonuses and commissions from their work
- They may receive an income from property or shares or other investments
- They may have a side business
We regularly monitor and assess the Weekly Family Income of a certain locations and compare it to the average for that State.
Let’s take a closer look.
In a previous article, I argued this may be the most important piece of property data you may not be using.
As we are seeing in the current environment, people who lose their job or sole source of income during this period, unfortunately struggle and may be forced to sell.
Others can rely on other sources of income during this period and be able to ride it out without being forced to sell.
In these locations’, prices may soften but they will not drop drastically like the 30% -50% being predicted.
I must also stress, this is not a judge of people, but an analytical perspective on the data.
This can also be the key to lowering the risks inside your own portfolio.
And boy, it is more evident right now than it has ever been previously.
Areas that are heavily reliant on tourism, retail and manual work have virtually come to a stand still.
Leaving many employees out of work, with little to no income.
Those jobs that are based around professional services like IT, Financial and without doubt Health have thrived.
Many that have been affected have still been able to work from home and earn an income.
A point you have no doubt heard many times before, the vast majority of these jobs are within or very close to our CBD’s and Hospitals.
Why fight the big trends?
Understanding the demographics of a location you are about to invest in can be very important.
While we all endeavour to maximise our returns, significant risks can often be overlooked.
By getting a clearer picture of the trends and data for the location you may be able to achieve the best of both worlds.
Owner occupiers with higher incomes can and do pay more to buy and improve their properties.
This will lead to greater growth and returns for your portfolio.
Then in downturns, they will not sell and can afford to ride it out and in almost all cases, they will do whatever it takes to keep their family home.
So, prices will never drop sharply, and they tend to recover significantly quicker.
If you are building true wealth, you need a deeper level of understanding and perspective, as opposed to a news headline or tip from a family member.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you’re wondering what will happen to property in 2020–2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.
If you’re looking at buying your next home or investment property here’s 4 ways we can help you:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! This will give you direction, results and more certainty. Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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