— Property

Property Investment Strategies – Capital Growth

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. The capital growth property investing strategy is still trendy amongst property investors. 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 it can help you

Last 20 years, capital growth trends and median property prices for houses and units.Past performance of a suburb can help predict future capital growth
Average property days on market to sell time/auction clearance ratesTracking this helps ascertain the current supply and demand for property in a locality.

Where demand for property consistently outstrips the available supply over the long term, prices will tend to rise.

The ripple effectWhen 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 new 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 desirability of the location followed by population growth, increased employment, and further investment.
Increases in income levelsAs 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 growthInward migration to a suburb can influence capital growth as when people arrive in a locality, they need somewhere to live straight away.

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 pricesThis reflects high rental demand and the attractiveness of a suburb.
Low supply of vacant land for developmentLess land 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
neighboring suburbs
By identifying trends in these differentials, investors can identify gaps where suburbs can potentially 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

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