Josh Masters, Buyers Agent at Buyside explains five key principles to help you spot the next property hotspot.
With all the different aspects of property investment it’s easy to lose track of what’s important in order to make money. Sometimes it’s best to keep it simple, so I often find that the best way to identify growth is to look out for one thing – change.
Changing demographics, changing laws, changing landscapes – there are a multitude of changes that are worth looking further into in order to see how the market might react and how you can be first to capitalise. Here are five “changes” worth keeping an eye out for:
From roads to shopping centres, rail lines to light rail, increased infrastructure brings people together and increases trade and growth in the area.
Take the new Sydney Metro rail link connecting the norwest line from Chatswood through to the southern suburbs via Sydenham and all the way through to Bankstown.
This project will incorporate a new harbor tunnel, increasing the capacity of the rail network and will re-invigorate areas of the city to the south that may once have been overlooked due to their poor accessibility to services.
You can read more about this project here.
New light rail lines can also be good projects to find out about in the early stages. While the tracks themselves aren’t as important as where they stop, they can indicate the likely direction that future growth and development might take as the population expands.
In NSW, the Sydney CBD and South East Light Rail project is going to provide streamlined transportation links between the south and eastern suburbs through to the CBD, carrying five times more passengers than traditional buses that will no doubt increase popularity around the new station hubs.
Keep in mind though that funding to projects like these can often change depending on who is in government at the time and how the budget is looking. This project however, is due for completion in 2019. You can read more about it here.
Rezoning is when the councils change their requirements around the use of the land and often around the density of the living spaces allowed in that area in order to allow for infrastructure projects and planning developments.
In October 2014 for example, developers were successful in gaining approval for putting in a rezoning proposal to NSW Government for the Victoria Rd end of Marrickville for a proposed 3,000 dwellings which will no doubt increase the amenity in this area. Re-zoning can also happen at the outskirts of cities or regional centres where land releases are made available and developers buy up large areas of what was once farmland to build a new housing subdivision.
If you’re not carrying that sort of budget though, new train lines and infrastructure can mean that what was once a suburban sprawl is now the future hub for transport, shops and unit blocks. Think North West Rail Link, where the new train line is set to help boost the population for the Hills District from 177,000 in 2011, to 280,900 by 2031.
Targeting houses with large blocks in areas close to future stations can result in boom times for their owners who capitalise on the higher density housing allowances that often happen near transportation hubs.
While this doesn’t happen often, changes to the law such as those that occurred in the self-managed super fund space meant that many people now had control of their retirement fund and were looking to move it away from the industry funds.
As a result, many studio apartments and one-bedders that were traditionally shunned by lenders who felt there was too much risk in such small premises found a willing and able market in the SMSF space, where buyers had enough cash to pay for the unit outright and didn’t rely on having to borrow money.
In hindsight, this makes perfect sense given the high yields that SMSF’s were chasing and that the studios and one-bedders provided, and we all know Australians love to buy property.
The question is, what new legislation is coming in the future? What will be the ‘knock-on’ effect in the marketplace that could potentially move funds from one market to another that you could capitalise on?
Today Australia is known for its mining industry and many towns have profited from the growth, but it wasn’t always so.
Towns like Karratha, Moranbah and Port Hedland were sleepy hollows until the mining companies set up shop in their front yard. The rest, as they say, is history.
We have since seen property values in mining towns increase ten-fold over a space of 15 years and for those investors who saw the writing on the wall before everyone else have made themselves a small fortune.
Of course, things are different now and we have certainly seen the market cool off. In post-boom Moranbah, a coal-mining town about 190km west of Mackay, the median house value dropped 66% since 2012, from $404,006 to $251,933, while Port Hedland falling nearly 40% in the same two years as well. Where market changes giveth, they can also taketh away.
What is important here though is the emergence of potential new economies and the vast resources that will be driven into the next sector. As investors, we need to be asking ourselves where the new growth will come from in our region or state and how can we take advantage of it? Will it be well- located industrial areas that get transformed into new tech hubs, or will it be the great deserts of Australia that can house a growing demand for solar infrastructure?
5. Housing policy
Once the ghettos of the Australian community, housing commission (or social housing) has been undergoing its own changes over the years, with government realising that large areas of low-income, underemployed youth does very little for the community at large.
As a result, many of these government- owned housing areas are slowly being sold off at prices reflecting the reputation of the area.
Over time though, these properties are being renovated and new families are moving in, transforming a low-end neighbourhood and lifting the prices of all houses in the area.
Sydney’s Walsh Bay is a great example, where sandstone terrace-style council housing is now being transformed and the area boosted to become one of Sydney’s prime arts and performance districts.
Keeping an eye out for change in any area of the market is always a good exercise if you are to spot the next opportunity, but don’t forget to ask yourself what the implications of that change will be and how it will have a flow-on effect down the line.
You will also need to assess your own level of risk around investing in these areas and consider whether you’re open to a more speculative, early stage of investing. Ask yourself the right questions though, and you may uncover your own emerging market.
Save time with a property expert
Property can be a lucrative investment, however researching, managing legal and finance requirements, finding tenants and property management can be stressful and takes time. This is where a property expert can assist. If you want to discuss the possibility of saving time by using an expert property consultant, please contact us for an introduction to Josh Masters.