The property market isn’t dead, if you know what to look out for, according to property economist and principal of Suburbanite Anna Porter.
Porter shares her growth accelerator strategy for investors looking to capture growth in a falling market.
“Investors need to look for a strong foundation of economic drivers, good population growth, good job growth, strong market demand for property and employment diversity is really important too,” says Porter.
“This can’t just be one single employer or industry and speculating growth in a particular suburb based on reports of a new factory or business hub opening is also to be avoided,”
“Investors should look for a good pipeline of infrastructure either in the area or coming to the area to create strength in the economy which will ultimately lead to growth.”
Porter believes property markets don’t grow on their own and when economies grow on a local level they pull the property market through.
A strong economy results in a strong property market but with infrastructure as a key driver, it is important to evaluate the impact individual projects will have on the property market.
“When evaluating infrastructure projects, look closely at the key drivers like jobs created off the back of the project be it direct employment or indirect through the supply chain. In turn, this will generate interstate migration, population growth and economic stimulus to the local business sector,” says Porter.
“This drives price growth in the property market and rental demand. Without these key elements, projects have very little short term or immediate impact on the market and are better considered as a longer-term vision for the liveability of an areas,” continues Ms Porter.
Anna Porter has seen an increase of investors taking a speculative approach and land banking in areas with little knowledge of where and how reported infrastructure will roll out and warns strongly against this.
“This can be a risky strategy as a major road project can have a positive impact in many regards but if your land is in a noise corridor or will later be impacted by access to main roads and freeways adjacent then this will negatively impact your property,” says Porter.
“Too many investors are jumping into deals without all the information readily available.”
Porter also suggests investors should look out for the key statistics as a self-health check on the market.
“The key statistics are vacancy rates, days on market and the 12-month growth profile,” suggests Porter.
“When looking at vacancy rates, you want these to be low, at least under three per cent and under two percent is even more ideal. Vacancy rates of five percent or higher are an indicator the economy is struggling,”
Investors want to be looking out for days on market also.
“If it takes a long time for people to buy property on average, that means the market is not seeing the buoyancy it needs to see in the demand sector,” says Porter.
“Markets really work off supply and demand being balanced or having higher demand. When there’s an oversupply issue or lack of demand that can really throw the market out of whack and this will show through in the growth statistics,”
“Aim for under 100 days on average when evaluating this statistic.”
The third key statistic is the 12-month growth profile, which must be positive.
“Investors should be looking for positive growth coming through in the majority of suburbs in the area. If a lot of the suburbs in the area have a negative growth profile that can indicate the market is in a correction stage and in the downward stage of the cycle,” says Porter.
“These are the three biggest indicators investors should look for and if you can get the right story out of this then delve into the economic drivers.”
The right economic drivers coupled with the right statistics can tell you that the market is in a good position to capture growth, according to Porter.
“Areas that don’t capture growth or hold a lot of risk in growth profiles are outlying regional areas which can hold a lot of volatility and capital cities that don’t have anunderpinning employment driver,” says Porter.
“This is what we’re seeing in Tasmania which is lacking major employment drivers. Statistics indicate for every five-people moving to Tasmania there’s only going to be one job created,”
“We always also see markets at a risk of oversupply where they’re building too many units or too many house and land packages which can sometimes dampen the demand because the supply outweighs it.”
Porter suggests these are the things you want to avoid.
“If you see these things in a market that you’re looking to invest in, that can lead to a lack of growth in those markets,” concludes Porter.