Property Research: Fundamental Analysis vs Technical Analysis

What approach are you using to make the vital decision of investing in the property market?

House Research Property InvestmentIn my mind there are two approaches that I use when researching and analysing data in order to make an educated and informed decision.

While both methods are important, the data used for each process will differ according to many factors.

In these unprecedented times, I have spoken before about the need to be using more than gut feel to make long term, financial decisions.

You should be using research, data and more importantly facts to make important, long term decisions.

Here are my thoughts;

Fundamental Analysis

In my mind the fundamentals are extremely important when looking to invest in property over the longer term.

Property ResearchI would argue that fundamental analysis is what separates the educated investor from the speculative investor.

While there are many ups and downs and twists and turns in every property cycle, it always falls back to the fundamentals.

So regardless of the timing of the cycle, ensure that the inherit backbone and structure of the market you are analysing is strong.

For me, fundamental analysis involves things like;

  • High Owner Occupier percentages

In locations where there are more owner occupiers than investors, there is far less volatility and more predictability.

  • Weekly Family Income

In suburbs with a higher weekly income, people have multiple streams of income that allows them to ride out the difficult times and often get emotional and are able to pay more for property in the good times.

  • Land to Asset ratios

We are looking in areas where land is scarce and at a premium. We ensure it makes up a higher portion of the purchase price.

  • Supply and Demand (macro)

We look for land locked areas where there is no more available land to build and combine it with areas where jobs growth and therefor population growth is considerable higher.

This fundamental analysis should form the platform and base for you to build upon.

Technical Analysis

Once you have a solid base set, you can then begin to fine tune your analysis.

Now is the time to use technical analysis to assist you with your timing.

Even for seasoned professionals, it is difficult to time the market, but by understanding more precise data, it ensures we won’t get it completely wrong.

Some of the analysis here should include;

  • Auction clearance rates

This data is readily available and much more accurate in southern capitals, but by studying short to medium term numbers it allows us to understand current market sentiment.

  • Days on market

When DOM begin to consistently get shorter, it may be time to buy. On the other hand, if DOM are increasing, it may pay to hold off.

  • Median House Price

Median house prices are published at least every quarter and can also give a good indication of where property prices are heading. There may be a lag factor here, so not as reliable as other forms like Asking Prices.

  • Supply and Demand (micro)

With technical analysis, we want to target the supply and demand of the specific area or suburb we are looking to understand these key micro factors.

Hotspots

I would argue that Technical Analysis alone is a big part of what analysts, commentators and media use to identify Hotspots.

Port HeadlandsThey fail to understand and undertake full analysis by ignoring the fundamentals of the location.

As a result, todays hotspots become tomorrow’s NotSpots!

Look back on all the previous hotspots touted by the media and “guru’s”, the Gladstone’s, the Port Headlands and Townsville’s.

While the short term and current market data may have looked highly favourable, the underlying fundamentals were considerably less favourable.

Adding to that, analysis then became clouded with things like emotion, gut feel and FOMO and there were serious ramifications.

People loss hundreds of thousands of dollars, as they didn’t set a platform first and never considered the fundamentals.

In Summary

In the current market, it is the fundamentals you should be analysing and only when they look favourable should you undertake further technical analysis.

Start with some of the data above and study the incomes, the demographics and supply and demand issues of the overall economy and drill down.

Long Term Invest

Technical analysis will also be difficult due to lower stock levels and buyer activity, but trends should still be noticeable.

Median Prices and other specific data may soften, but now is the time to monitor and take action as it starts to improve and head in the right direction.

By ensuring you use a combination of both forms of analysis it will ensure you buy the right property in the right location and also at the right time.

Perhaps creating wealth or investing is one of those things, but you do not know where to start?

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:

  1. 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 Metropole
  2. 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.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. 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.

NOW READ:

The coronavirus means nobody is searching for houses

Coronavirus crisis: I have no idea what will happen to property prices!

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Brett Warren

About

Brett Warren is Director of Metropole Properties Brisbane and uses his 13 plus years property investment experience to advise clients how to grow, protect and pass on their build their wealth through property. Visit: Metropole Brisbane


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