Jeremy Shepherd, director of research for Redwerks, and a keen property investor with a portfolio of 16 properties, believes that by looking at the demand to supply ratio, or DSR, investors can gauge a market’s potential for capital growth.
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.
“Comparing the entire Australian market of DSR scores is a great way to short-list potential hotspots,” he says. “The data upon which the DSR is based can also be used to locate markets for investors looking for something in particular.”
As an example, he has sourced 14 cheap suburbs from DSR data that could be poised for high capital growth this year, applying a few restrictions:
“Some investors don’t want to buy in areas they have no prior knowledge of, so I’ve included the top markets in each state, rather than the top markets in Australia. This is in case one state dominated.”
He adds that only markets with a decent level of stock on market were considered. This is because he believes that if the supply of stock on market is too low, it is difficult to find properties to buy. All markets in the table below had at least seven properties for sale at the time of writing.
The results are in the table below:
Cheap suburbs with high potential
|
State |
Post code |
Locality |
Dwelling type |
Typical value |
DSR |
|
ACT |
2615 |
CHARNWOOD |
Houses |
$396,500 |
35 |
|
ACT |
2617 |
BELCONNEN |
Units |
$395,000 |
33 |
|
NSW |
2230 |
WOOLOOWARE |
Units |
$345,000 |
36 |
|
NSW |
2145 |
PENDLE HILL |
Units |
$313,000 |
33 |
|
QLD |
4064 |
PADDINGTON |
Units |
$430,000 |
25 |
|
QLD |
4717 |
BLACKWATER |
Houses |
$395,000 |
26 |
|
SA |
5161 |
OLD REYNELLA |
Houses |
$329,000 |
29 |
|
SA |
5163 |
HUNTFIELD HEIGHTS |
Houses |
$271,000 |
31 |
|
TAS |
7016 |
RISDON VALE |
Houses |
$168,500 |
26 |
|
WA |
6147 |
LANGFORD |
Houses |
$333,000 |
33 |
|
QLD |
4054 |
ARANA HILLS |
Houses |
$395,500 |
25 |
|
WA |
6147 |
LANGFORD |
Houses |
$333,000 |
33 |
|
WA |
6108 |
THORNLIE |
Houses |
$374,500 |
28 |
|
WA |
6064 |
KOONDOOLA |
Houses |
$294,000 |
30 |
Source: www.DSRscore.com.au
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.
