Property investment is about picking the best suburb to earn you the most profit – which is why learning how to determine growth areas is vital to the strength of your portfolio. Sarah Megginson investigates...
Investing in property can often be a gamble. There’s no foolproof formula for making the perfect investment, as there are many factors involved that can change at any point in time. You have to consider the economy, government spending and the property cycle from a bigger picture viewpoint. At a macro level, each suburb and neighbourhood has its own attributes and drawbacks, which can impact supply and demand.
There are ways to increase your chances of investing smartly. You can set yourself up for property success by adopting a capital growth strategy, which involves buying in growing suburbs to get the most long-term gain.
The crucial element here is buying in the right location, by determining the areas that are expected to remain popular in the future. Careful research is key, because making an uninformed decision can be costly if your chosen suburb fails to perform well.
Here we offer tips on how you can pick out the best growth suburbs for investing:
1. Review sales statistics
Reputable sources like can provide you with data on the sales performance in suburbs over a number of years. This information helps you determine where a suburb is at in its growth cycle – whether it’s peaking, bottoming out or close to a boom. Real estate agents will have these statistics on hand as well. Be sure to look for growth trends: how has the market performed over the last 1, 3 and 5 years?
2. Look at available supply and existing demand
Even if a suburb is doing well in terms of sales, consider how much construction is happening in the area. If there are plenty of developers breaking ground, that could lead to a property oversupply, causing prices and yields to fall. Rising rental yields is a strong sign that a suburb has low supply and is becoming popular. A suburb with a growing population is also bound to strain supplies of available property stock.
3. Know what the government is planning
The availability of amenities adds considerably to a suburb’s value, so keeping an eye on government proposals for implementation can work to your advantage. Figure out what infrastructure projects are happening in the area – is there new public transport planned? Is a shopping centre being launched nearby? These amenities can improve a property’s appeal to potential tenants.
4. Don’t go for what’s peaking
When you’re investing for growth, you have to look at the long-term picture. So, what’s booming now may not be a good investment for you, because prices are already high and returns are slowing. Thus, you don’t get to make the best of it. You may want to go for a nearby, more affordable option that is likely to benefit from the ripple effect – then, you will already have a claim in the area when it begins to boom.
5. Identify gentrifying areas
There are many suburbs that were once considered poor, but that have since gotten a second wind as working professionals move in and gentrify the suburb’s stock. To know if a suburb has potential for gentrification, monitor streetscapes for new renovations, and notice the trends of property prices over the last 2-3 years. Who makes up a significant proportion of buyers? An influx of young, financially sound buyers is a strong indication of gentrification potential. If the local restaurant and café scene is picking up, you’re looking at what could be a gold mine.
6. Don’t fear what you don’t know
While many investors like the idea of investing nearby, as it feels familiar to work with what they know, being afraid to branch out can be detrimental, especially if you live in an area that has limited potential. Arm yourself with research, and look into investments you may not have considered before, based on where you due diligence takes you. Be willing to travel a little and see what’s out there so you can learn something new.
Investing in property can be a risky business, but the financial rewards of building a strong portfolio of growth suburbs can be worth the risk. The key to success is education: with adequate research and advice on your side, you can build a successful portfolio that delivers wealth well into your retirement years.
