4 Signs to Spot a Growth Suburb

Understanding Capital Growth in Property Investment

While some property investors prioritise rental yield – that is, how much income a property earns as a percentage of its value – others see capital growth as the ultimate objective.

There is no guaranteed way to predict the future capital growth of a suburb, but there are growth indicators that can strongly suggest that property prices will increase.

In the current buying climate, with historically low listings and strong demand for available properties, doing your homework is key before buying an investment property. Here are four signs to look out for when researching a suburb’s capital growth potential.

Demand is Likely to Outweigh Supply

Ideally, if you can find a suburb where demand is likely to exceed supply, that’s usually a strong indicator of potential growth.

Look at how much available land there is in the suburb. Is there much more capacity to build new houses? If the answer is ‘no’, then property prices may go up.

Also, consider the likely population growth in coming years. If more people are expected to move to the area, demand for housing will increase, thereby potentially pushing up dwelling values.

Checking the average property days on the market, discounting rates, and auction clearance rates can also help you ascertain the level of demand in a suburb.

There’s Strong Investment in Infrastructure

When the government invests in new infrastructure in the area – such as a new school, hospital, or train line – it may help push housing prices upwards in the near future.

New or improved transport links can make a suburb more attractive to commuters. Other investments in infrastructure can create employment opportunities, increasing the demand for housing among workers.

Do some digging online to see what planned infrastructure works are in the pipeline. The local council can also be a good resource to investigate upcoming infrastructure projects.

The Suburb is Being Gentrified

Gentrification occurs when buyers with higher incomes move into a lower socio-economic suburb and begin making improvements.

As the average income in the area increases, those individuals spend money on enhancing the suburb, whether through renovations or local spending.

Signs of gentrification include:

• New hospitality or retail venues springing up in previously uninviting areas

• Established homes being renovated

• New residential buildings being constructed

• Larger infrastructure projects in the pipeline

• A younger demographic moving in

  
  

Once a suburb undergoes gentrification, property prices often head north. Therefore, check for signs that indicate things are heading that way.

Nearby Suburbs are Experiencing Capital Growth

If a nearby suburb has experienced a surge in prices in recent years, chances are that growth could trickle across to neighbouring areas.

When you’re doing your suburb research, consider areas that have experienced recent price growth. If there are surrounding suburbs that are more affordable and yet to experience a boom, they may be worth investigating for potential investment opportunities.

The Importance of Research

Conducting thorough research is crucial in identifying growth suburbs. Understanding the dynamics of supply and demand, infrastructure developments, gentrification trends, and nearby suburb performance can provide valuable insights.

Investors should also keep an eye on economic indicators and local government plans that may influence property values.

Ready for Your Next Move?

If you’ve found a property with strong potential and you’re ready to grow your portfolio, I can help you organise the finance to make your next investment move possible.

Get in touch today to discuss your options.