Are you a bit of a Property Nerd like me?
Do you like to keep up to date and continually analyse data and the numbers to ensure you are able to make an informed decision?
Even if you are not, I am about to share what I believe to be the most important piece of property data you should be analysing for the next decade.
And I bet for the 99% of the property “experts”, it will barley rate a mention.
Before I reveal the answer however, it is important to take a step back first and understand how our economy will look and function over the short to medium term
Make no mistake, Inflation is going to continue to be at historic lows.
Unfortunately for most of us, this will reflect in many ways, but it will hurt our hip pockets the most.
You see this will mean Wages Growth will also be going nowhere for the foreseeable future.
Understanding these two key points, before doing our research is very important.
So, in locations where wages growth is going nowhere over the short to medium term, there is a sufficient enough argument to suggest that property prices will do the same over this extended period.
How do we resolve this problem?
We look for areas where people’s income will continue to grow and we do this by, analysing Wages Growth.
I must also stress, this is not a judgment of people, but an analytical perspective on the data.
90% of the Population
Below will likely be the scenario for the majority of Australians wage over the next decade.
Their salaries will track either at or below the average and have little to no growth.
This demographic tends to live pay cheque to pay cheque and tends to have lower rates of savings and buffers and will not be able to afford to pay for the type of property they’d like to own.
Here is an example of the type of location you should be avoiding.
This chart from SQM Research shows a location where wages growth is falling behind the state average growth.
These suburbs tend to be in the outer suburbs of our capital cities and regional Australia.
10% of the Population
The remaining 10%, will have incomes that will continue to rise.
I say income“s” for a reason, as this demographic does not just rely on a sole weekly wage;
- Many are professionals with bonuses and commissions on top of their wage
- Most invest in property and the value of properties and rents will increase in the right areas
- Many invest in shares and receive dividends
- Many have savings and other investments that return an income
- Some have a side business
Here is the type of location we look for, as you can see the weekly family income in this suburb is growing faster than the state average.
These locations are usually the more established suburbs of our capital cities close to major employment hubs like CBD’s, Airports and Hospitals.
These will be the locations where property prices will rise, because there will likely be a shortage of supply relative to the larger demand from an affluent, aspirational demographic.
This demographic will continue to get emotional, pay too much for property and overcapitalise on renovations and rebuilds, all forcing up property prices.
They will do this because they have multiple, increasing incomes.
This type of Demographic also has a secondary affect – insurance.
Almost every year there is an X – Factor, or Black Swan event.
It could be anything from a GFC style event, to a flood or a political change, so savvy property investors always keep this in mind.
The 10% more affluent demographic can ride these events out.
As I pointed out they have higher rates of savings and buffers in place for these times.
Put simply, they can weather the storm.
The 90% cannot, they are often forced to sell up or move out in times of major events and even when interest rates increase, they struggle to keep up.
As a result, these markets are highly volatile and I would avoid putting my capital there.
While not a perfect formula, it is the 10% that will prove a lower risk for your capital and this is where I will be investing.
There are hundreds and hundreds of different pieces of data you can analyse as an investor.
But, over the next decade I feel that Weekly Income and Wages Growth is one of the most important.
The vast majority of people will not see a boost in their weekly wage over the short to medium term and property prices in these areas will remain stagnant.
A small percentage will, they have additional streams of incomes, such as property, shares and other side businesses to boost their incomes.
In these locations’ prices, like wages will continue to rise.
I believe as an investor, your must important job right now, is to find out where these people live.
Start analysing the right data (freely available from the Australian Bureau of Statistics) and you will reap the rewards!
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