Hottest suburbs for 2012
Locating areas that would suit your strategy has just become easier with this list of top suburbs to explore in the year ahead.
Everyone is in a different circumstance and at a unique point in their investing career. Everyone has their preferred investment strategy. Some investors want positive cash-flow, some are after renovation opportunities, some want cheap, some want bargains and some want to buy and hold for the long run. So how can an investor look at the data available in a way that assists them with their specific needs?
The demand to supply ratio, or DSR, is an excellent indicator investors can use to gauge a market’s potential for capital growth. Comparing the entire Australian market of DSR scores is a great way to short-list potential hot spots. But the data upon which the DSR is based can also be used to locate markets for investors looking for something in particular.
The DSR is a measure of the imbalance between demand and supply for a property market in Australia. A high DSR represents a greater statistical likelihood of immediate capital growth compared to a low DSR.
The data in the tables following were all sourced from the DSR data for September 2011. A few restrictions were applied.
Firstly, only markets with a reasonable degree of statistical reliability (SR) were considered. In this case, only markets with an SR of 62.5% or higher were allowed. Secondly, only markets with a decent level of stock on market (SOM) were considered. If the SOM is too low, you can’t find anything to buy. All markets shown had at least 7 properties for sale at the time of writing.
We’ve chosen markets based firstly on DSR and secondly on another statistic like yield or typical value. Some investors don’t want to buy in areas they have no prior knowledge of, so we’ve included the top markets in each state rather than the top markets in Australia. This is in case one state dominated a particular list. Some of these locations may not have a very high DSR though.
These kind of lists should only be used as a starting point of further due diligence. As with all statistics, be sure to apply some sanity check to the data by performing your own fundamental research. Check that the data makes sense and is still current.
High yield markets
Capital growth is what makes investors truly wealthy. But you can’t ignore cash-flow. For those investors with tight loan serviceability, table 1 may be of interest to you. It lists the markets with both excellent potential for capital growth and great cash-flow too.
Table 1: High growth, high yield suburbs
Cheapies with high potential
If you’re a little short on equity or serviceability, you may need to go cheap. Table 2 lists the top markets for immediate capital growth by DSR but with affordable prices.
Table 2: High growth and cheap
Markets for renovation flips
If you’re planning to buy, renovate and then sell, you’ll need to know that the market you’re investing in will support a quick sale. Table 3 is a list of markets with high DSR as well as low days on market (DOM).
Table 3: High growth – quick sale
Suburbs to get big discounts
Table 4 shows those markets with the largest discounts offered to buyers from the original asking price. This is where bargain hunters can negotiate a great deal. But be sure you know what you’re doing in these markets, don’t expect much capital growth in the short term.
Table 4: Low growth – but big discounts
If you’re worried about a newly purchased investment property experiencing an extended vacancy period, you’ll be interested in the data in table 5 which shows high DSR markets with low vacancy rates. The list compiled also considered the proportion of renters in the market. A low proportion is preferable so there is less competition amongst landlords for tenants.
Table 5: High growth – low risk
Although the DSR bundles important property statistics into a convenient single score, the data on which it is based can also be browsed to target markets for investors with special requirements. With 15,000+ localities around Australia it makes short-listing your next market so much easier and gets your due diligence off to a robust start.
To discuss this article or anything to do with your finances, please call our office today and we will be happy to assist you.