What drives property price growth?
Especially in this era of lower interest rates, lower inflation and lower capital growth in general?
If you want to one day live off the fruits of your property portfolio, you’ll need to own the sort of properties that grow at wealth producing rates of return that outperform the averages.
Today we’re going to have two different views on the subject.
First, Brett Warren is going to give his thoughts and views on the subject. Then, I’m going to have a chat with Pete Wargent, who says there are only three factors that drive property price growth.
These two guests are probably going to end up in much the same place, but after listening to both you’ll be much more informed about how to choose an investment-grade property.
Demographics is a critical factor in both property prices and the economy.
Understanding the demographics can make the difference when it comes to choosing the right property.
Some of the most important factors to look for include:
- Owner-occupier appeal
- A homeowner is unlikely to panic and sell their home at the first sign of a crisis, but an investor might.
- An area with a higher percentage of homeowners than investors is likely to be more stable than an investor-heavy area.
- Income level
- Areas that are good for investing tend to attract residents who aren’t living paycheck to paycheck.
- Instead, the owner-occupiers tend to have multiple income streams. Dual incomes, bonuses and commissions, side business, and income from property or shares, for example
- Occupation type
- Look for areas where people are employed in professional services such as IT, financial, and health services
We have to take a step back and assess the fundamentals because the fundamentals don’t change from week to week or month to month. If you can get those right, you can make the best investment decisions.
Don’t forget the 6-stranded approach.
- High owner-occupier percentage
- Not off the plan
- Land-to-asset ratio
- What happened during a downturn
- Something with a twist
- The ability to add value
- Supply – The rate of new construction and the number of properties listed for sale
- Interest Rates – The cost of borrowing
3. Population Growth – Includes factors like immigration, natural population growth, and interstate migration.
Brett Warren - Metropole Property Strategists
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Pete Wargent’s new book Low Rates High Returns
“We’re looking for areas where people can afford to, because they’ve got higher incomes, and they’re prepared to pay to live in those areas, because of the aspirational element of those suburbs.” – Michael Yardney
“There was a period of oversupply before, but now it’s the other way around. There’s actually the lowest level of listings available with new or established properties than there has been for a long time.” – Michael Yardney
“The government hasn’t spent all that money and all that effort to get us across, and then let us fall over a cliff.” – Michael Yardney
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