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Why Property Investors Need To Track Real Estate Markets

by | Jul 20, 2021 | Blog

There is not ONE single property market in Australia. 

Instead, we have seven or eight primary markets and big cities, that work countercyclical to each other – as one rises, another falls. 

While we can’t control these markets, we can absolutely make informed decisions about which markets to buy into. 

One way we can do this is by looking at the economics of an area and the affordable zones of that market. 

 

Economics As A Driver For Real Estate

There are six key market drivers for economic growth in real estate. These are – economics, yield variation, supply and demand, population growth, infrastructure and demographics. 

Economics is a fairly broad term that can sometimes be misunderstood, so how do we break it down to understand the economics of an area?

Think about economics as house price versus household income. The idea is to seek out suburbs that have higher household incomes but lower property values as this confirms that the market in that area is steady.

This strategy is common for property investors who are tracking a market to see where it sits in the cycle and if it is likely to become viable.  

 

Markets Have Four Affordable Zones

Real estate markets grow – but they are made up of different components. By looking into market data, we are able to determine what kind of market we are looking into and where it is poised to grow.

Bearable market: Markets start by being bearable. A market is bearable if it is stable, where the majority of people in the area are easily able to afford the local property prices. 

Equitable market: An equitable market is determined by capital growth. Capital growth as we know builds as the property increases in value over time. If we had a 10 per cent increase of capital growth on our property what we’ve now also gained is equity. 

This again is influenced by having a high income household with low house prices.

Sustainable market: A market is considered sustainable if it continues growing at a fairly steady rate. Again, if the income is high and the house prices are low this allows the market to run for a long time.

Viable market: If the market has met all of these components, then it is considered to be a viable market for property investors to buy in.

 

Make The Most Of This Growth Strategy

In Australia we don’t see a lot of crashes in real estate because of the economics. In fact, the Australian market as a whole is generally bearable due to this. 

However, as investors we should be consistently tracking where we are in the market cycle in order to help us predict where we should go next and what we can do to achieve our desired outcome.

For the best tips and strategies in understanding real estate markets it’s worth coming along to one of our free property investment nights run by our team of property experts. 

 

Spots are limited so ensure you book now so you don’t miss out. 

 

REGISTER HERE.

 

By Sam Saggers

Wealth Strategist – Investor – Coach

Jason Whitton

Founder and Chief Education Officer