In the past many investors were limited in their knowledge of the property market. People could wing it if they knew the area well enough, but when it comes to creating wealth you need to know what influences capital growth in an area. Thanks to the internet, you too can easily identify growth drivers and learn when and where to invest.
In the past, it was very difficult to determine if a particular suburb had the right growth drivers. People knew that real estate was a "sure thing", but they didn’t have the tools to carry out the required research. The average investor uncovered real estate buys by experience, and often with lots of luck.
Most people walking or driving to work could see the developments in their areas, while others would pick up the local newspaper or watch the 6 o'clock news and learn about new infrastructure and government spending that was about to take place.
There are now plenty of government websites and fee-for-service sites that provide you with information on what growth drivers to look for in an area.
But what factors make an area grow, and what do you look for?
Determining an Areas Growth Potential
The first thing to try and determine when you do your research into a particular area is the future growth driver potential for that area.
Don’t make the mistake of basing your decision to invest in property solely on cash flow or capital growth alone - this information is based on historical data and trends which may or may not continue – and is therefore not a reliable measure of future growth.
Be wary about making decisions around research that is based on external influences of an area. Areas that rely solely on a particular type of industry, such as the mining towns of Western Australia or the car manufacturers in Adelaide are examples of growth drivers to avoid.
What Factors Influences Property Growth?
Strong demand for any area is largely due to a few growth drivers. Here are a few factors that influences growth:
1. Lifestyle Facilities
In the city, many people are attracted to areas that offer cafes, fine dining and entertainment. These areas make great investments and are also the most popular and expensive real estates to live in.
2. Beach and Leafy Suburbs
Many Australians are drawn to areas with great ocean views, white sandy beaches and rivers with picnic and BBQ areas, and with recreational fishing and boating facilities. As Australia’s population ages, areas such as the Central Coast and the Gold Coast are prime destination for those looking forward to retirement, as are leafy, tree-lined streets and picturesque suburbs in the Blue Mountains of Sydney.
3. Education-Medical Infrastructure
TAFE colleges, university campuses and medical facilities can attract a large pool of students, teachers, medical staff and interns who are looking for accommodation that is within easy commute to their place of work or study. Suburbs and areas that are within a 2 km radius walking distance also tend to benefit from such infrastructure spending.
4. Transport Upgrades and Development
It’s difficult to encourage investment and job growth in any area, but the development of new roads and railway lines can greatly improve the future growth of an area. Businesses and industries located near the city, seaport and airport areas generally benefit the most from newer roads and railway as they improve efficiency and can quickly move goods from one destination to another. Suburbs that were once considered “ugly ducklings” stand to benefit, particularly if they are close to the CBD or within easy access to job nodes.
5. Council Gentrification and Government Spending
Local councils that are willing to invest in infrastructure and local amenities, and government spending programs on motorways, airport and railway infrastructure can boost the local economy as well as renew an area.
House prices in Blacktown and the suburbs in South Western Sydney are prime examples of property that have performed strongly in the recent property boom due to new spending on road widening, railway infrastructure and the building of a second airport.
6. New Land Release
New land release, can have a negative impact on the performance of your property. If there is no new land release, you can expect more buyer demand as there is less stock that comes into the market. If there is a lot of new land release and approvals for new residential development, the growth of your investment property will be inhibited as buyer demand will be met with new housing stock.
The first port of call to get useful information on infrastructure plans and upgrades is local council websites. They contain a wealth of information and statistics on population, employment and the future plans in a particular area.
If you’re not familiar with an area, you will need to know if the council has a reputation for being proactive in their jurisdiction.
Does council quickly address these problems, such as road repairs or vandalism in a timely manner?
Do they quickly approve new developments and work with the community, such as the local chamber of commerce to improve the area?
If the area does not thrive, the potential gains and capital growth of your investment property could also suffer.
Besides planned infrastructure, look for such information as application for development, land releases and any other information that may significantly impact the area, such as flood maps and typography.
Besides council websites, the Australian Government commits billions of dollars into infrastructure spending. This spending can greatly boost economic development and jobs growth, and are therefore worth researching.
Here are three websites in NSW worth to help with your research:
The Roads and Maritime site - www.rms.nsw.gov.au
The National Infrastructure Construction Schedule (NICS) - www.nics.gov.au
Department of Infrastructure and Regional - Development - investment.infrastructure.gov.au