Buying into a suburb at the right time is the holy grail of property investing.
Time it right and you catch it on the uptick as buyer demand shoots through the roof, and you could flip it for a tidy profit, or hold onto it for a longer term play. Either way you come out on top.
So how do you go about identifying a boom suburb? Thankfully today we have a wealth of property and market data to help us make an informed decision.
Take a look: OpenAgent real estate investing hub
What type of property data should you look for when investing?
There are a long list of key property market data or metrics you should analyse when researching a market.
The ones we list here are especially significant and useful when it comes to identifying markets where property is set to boom, specifically:
Property values, where rising values over the short to medium term could indicate a positive trend. If you are looking for a boom suburb you need to zone in on suburb sales data.
This is typically displayed by suburb or postcode and lists auction and private sale prices for houses and units, along with addresses and sale dates. Here you would be looking for high growth rates in street prices over relatively short time frames - typically a few years.
Days on market
If properties are getting sold very quickly they will be on the market for a short period of time - described as days on market (DOM). This is a good sign that it is boom market, though you need to know your local market, as this figure can vary widely by market/location.
Rental yields, which details how much income/rent a property could fetch over a timeframe, as a proportion of its value. Rising rental yields are a good sign that there is strong demand for rental accomodation.
A clearance rate, expressed as a percentage, of the number of properties sold at auction over a week/month. Multiple factors can affect the auction clearance rate, including prevailing interest rates, the time of year, public holidays and even major sporting events. In major cities look for clearance rates over 70 per cent, though this can vary depending on the postcode and time of year.
Vacancy rates is a metric that tells you the amount of demand for rental property, with high rates indicating low tenant demand or a glut of rental properties on the market. Look for low vacancy rates as an indication of high demand for rental properties.
There are also other macroeconomic data and factors you need to monitor. This can include consumer confidence, interest rates, employment data and local economic realities like the market cycle - which can all influence the property market you are researching.
Where can I access property data?
So where do you get all this data?
There are a number of sources for property related data, ranging from subscription-based services to state real estate bodies, real estate listing websites and even local real estate agent sites. Some of the high profile and widely used sources include:
RP Data/CoreLogic which is the largest provider of property information, analytics and property-related risk management services in Australia.
Residex is another credible source of property market data, with suburb reports that detail median value of properties, demographic data, number of properties and the property types in the suburb, estimated days on the market (DOM) and the number of property sales in the past three months.
Realestate.com.au and Domain list properties for sale but also have a wealth of other data including property value, suburb data, a market snapshot for the suburb and surrounding area, and price estimates for properties right across the country.
Government agencies like the Australian Bureau of Statistics (ABS) have baseline financial, demographic and economic data that can also inform your decision making.
Most local estate agents have properties listed for sale on their site, so are a good source of listing data.
Other tips for identifying a boom suburb
So what other tell-tale signs should you be looking for that a suburb is about to boom? Buy into a property hotspot at the right time and you could greatly increase your ROI in a short time frame. Suburbs with standout growth potential typically exhibit the following signs:
A low number of properties on the market, accompanied by high demand for these, which often predates a rise in house prices.
Sellers are going the auction route, rather than listing for sale. This is a sure sign that real estate agents believe that the demand for properties in the area warrants an auction, where competition often drives prices up.
Major infrastructure projects are planned or are currently in the works, including upgraded transport links, a new shopping centre or major centre of employment - basically anything that is going boost lifestyles and the local economy.
Suburbs where the rental yield is rising, as this indicates there is strong demand for rental accommodation in the area.
Areas with a rising population and obvious signs of gentrification, such as high renovation activity and an uptick in shops, cafes and local businesses opening.
Getting advice from property professionals
There are a range of property and finance professionals who can help you make an informed decision when it comes to property investment. Consider contacting local real estate agents who will have insights on a whole range of issues, specifically the current state of the market.
They can also give you a realistic appraisal of your property, the best sale method for the area and help to market your property. If they handle the sale of your property then can also handle all the practical aspects like open house inspections, fielding enquiries from buyers and negotiating with them.
You can also consult a financial adviser, tax professional or mortgage adviser to help you make an informed decision.
Other things to remeber: what are your investment goals?
If you are new to property investment take the time to identify what your investment goals are, and if property fits into this.
Even in a boom market property will take time for capital growth to accrue. You also need to be aware that there are significant costs associated with purchasing, holding and selling a property.