The capital growth property investing strategy is trendy amongst property investors. There is no way to guarantee that the property you buy will increase in value but to increase your chances; you need to conduct detailed research on the property you are interested in and the suburb it resides in. Although the first few years of holding an investment property can be challenging, remember that capital growth can grow your equity if you invest wisely after thorough research.
Critical Indicators of capital growth
Indicators
How can it help you
Last 20 years, capital growth trends and median property prices for houses and units. The past performance of a suburb can help predict future capital growth. Average property days on the market to sell time/auction clearance rates Tracking this helps ascertain the current supply and demand for property in a locality. Prices will tend to rise when demand for property consistently outstrips the available supply over the long term.
The ripple effect
When the market starts a new phase of capital growth, prices often increase in the suburbs closest to the capital city center first. The ripple effect then sees the wave of recent growth ripple outwards over time to suburbs further from the city center and regional areas.
Future developments of infrastructure or amenities
Planned improvements to an area, such as a major highway, schools, hospitals, transport, and shopping centers, can lead to future capital growth due to increased location desirability followed by population growth, increased employment, and further investment.
Increases in income levels
As the average income rises in a location, so can the capacity of its residents to spend more of this disposable income on:
- Local amenities, retail, etc., with flow-on multiplier effects, can increase the desirability of a suburb.
- Renovations and improvements on their principal place of residence
or investment properties – improving the quality of properties in a suburb.
Population growth
Inward migration to a suburb can influence capital growth as when people arrive in a locality; they need somewhere to live immediately. Targeting areas with solid population growth and limited capacity for new housing, which can affect the demand for property, can affect capital growth.
Rising weekly rental prices
This reflects high rental demand and the attractiveness of a suburb.
Low supply of vacant land for development
Less land is available means fewer new properties to compete with existing properties. Where supply is constant and demand rises, prices tend to increase too.
Comparing median prices in neighbouring suburbs
By identifying trends in these differentials, investors can identify gaps where suburbs can catch up in capital growth. Discover Australia’s top-performing capital growth suburbs with our free pack of suburb reports. Download for free here. No one single factor can be seen as an indicator of capital growth. Thorough research of some or all of these factors can help you best predict whether a property you target will increase capital growth over time. Real Estate Investar members use Investar Search and RP Data, which are included in our Professional Membership, to perform extensive due diligence at a suburb and property level, including:
- Live market supply and demand analysis
- Complete suburb profiling, including rental income and growth trends
- Property valuation estimates on any residential property in Australia
