The real estate market can be compared to the ocean, in that it moves in waves. In this respect, the waves of real estate roll-in when the demand for property in specific areas increases and pushes price up. Then when demand decreases, the waves roll-out and property prices typically fall and adjust according to demand.
However, property prices usually don’t fall sharply. Price adjustments are typically marginal. Sydney is a prime example of this. Sydney property prices have risen by over 20%, in some areas, over the last 12 to 18 months. While many of these areas are now experiencing price adjustments, these changes are stated to be less than 6%. Plus, economists are predicting that the Sydney market will only experience a minor setback before it starts to climb again.
For property investors who are looking to buy, it’s important to remember that when a market slows this can allow you to have more negotiation power and for you to buy at a lower price. Then when property values begin to rise again, you will make a good return on your initial investment.
Investors typically seek a high rental yield so that they can cover their investment costs long-term. But, if you can buy a property that experiences capital growth, this then allows you to use the equity to buy more property or to sell the property, at a later date, to pay off debt. This, in turn, allows you to increase your cash flow.
Property experts suggest that there are a number of signs that you should look out for when buying. These signs indicate when a suburb is about to surge in value so that you can break into a market when it’s calm and lower in price, and then ride the storm or an up-surge in price until it peaks. Let’s look at these signs now.
There are typically 8 signs that a real market increase is about to occur. These signs are as follows:
1. Number of days on the market – when demand for property exceeds supply, then property will start being snapped-up. Therefore, the number of days a property stays on the market will fall and this indicates that this area is surging.
2. Discounting falls – usually to sell a property in a less attractive area, sellers will need to reduce their asking price. But, when this ceases to exist then it’s highly likely that demand has increased.
3. Higher number of auctions – when there’s a high demand for property, then a real estate agent will recommend auctioning a property. This will see a vendor usually fetch a higher price for their property. If an area has a greater number of auctions, then it’s likely that the suburb is heating-up.
4. Decline in vacancy – on average, a vacancy rate should hover around 3% if a market is balanced. A rate that’s less than this means there is a shortage of rentals, whereas a higher rate means there are too many rentals. Less means more in terms of investment.
5. Increased yield – strong rental yields occur because an area is popular with renters, this tends to push-up rental prices.
6. Reduced stock – if an area has little or no property for sale, then this typically means property owners are not willing to sell. This usually means when something does come-up for sale it’s snapped up fairly quickly.
7. Increased online interest – if a high number of people are looking at a particular area online, then this can indicate strong demand. This could signify a surge in price.
8. Underperformance – an area that’s underperforming that is surrounded by areas which are performing can sometimes be pulled into an upward price cycle due to surrounding interest.
Of course, before investing in an area, remember that it’s important not to rely on just one or two of the factors that determine a ‘hotspot’ before you buy. Instead, always look at these factors in combination to other property data, so that you make an educated decision.
Renters are said to be looking for property in areas that have excellent educational and work prospects, which are located near amenities or cafes. Hotspots across Australia include:
- Benowa QLD
- Willow Vale QLD
- Mount Coolum QLD
- Hobart TAS
- Blackmans Bay TAS
- Wollongong (Gwynneville) NSW
- Pallerson Lakes VIC
- Kingston TAS
- Greenwich NSW
- Paradise Point QLD
Regional areas to watch include:
- Barandundia VIC
- Dundowran QLD
- Huntly VIC
- Jones Hill QLD
- Heddon Greta NSW
- Ashfield QLD
- Cooma NSW
- Dongara WA
Are you thinking of buying a home? Then contact eChoice and find the right home loan for YOU today.