One thing that surprises me about research on a suburb’s investment potential is the way analysts fall back on the same measures time and again.
Median price movements and sale volumes seem to feature regularly, while vacancy rates and rental growth often make the cut.
I understand why these sorts of metrics are used, but I have a specific problem with property observers who rely solely on these numbers.
You see, talented advisors want to know where the market is going, not where it’s been.
The usual metrics paint a picture of what’s happened. Analysts use them by looking at past trends and assuming history will repeat. Unfortunately, a large part of that equation is faith in the concept of repetition, but if this year has taught us anything, it’s that there’s are no guarantees the past will predict the future.
I, on the other hand, want to know what’s going to happen, so I look for measures that are beacons of potential growth, not markers of the path already travelled.
So how can we achieve this level of foresight? By ‘counting cars’ of course!
Let me explain.
The goal is to select areas where demand for housing will increase and property prices will rise well before anyone else spots them. There are a number of things to consider, but an important one is identifying aspirational zones.
Aspirational zones are those suburbs with a growing appeal to higher-income, well-educated professionals who will look to buy or rent in the area. These households tend to have higher disposable incomes and the ability to contribute more towards purchase prices or rents over time.
Here’s why car counting is utilised, among other measures, by Aspire analysts.
Most Aussies are not quite ready to live without their cars despite advancement in public transport and pushes for more environmentally economical schemes such as scooter parks or share car facilities. These programs are the exception rather than the rule – particularly in some of our preferred capital-city hotspots such as Brisbane where lower population density – as compared to Sydney – and gaps in the public transport system make car ownership pretty much essential.
So, identifying the breakdown of car ownership per household by suburb helps reveal the aspirational advantage of a locality. In short, areas with greater numbers of cars per household tend to be those with higher disposable incomes.
Here’s a great example.
We recently highlighted the excellent investment potential of Bridgeman Downs in Queensland.
Among the metrics, we found the suburb had proportionally more cars per household as compared to the QLD average:
|Number of registered motor vehicles||Bridgeman Downs||%||Queensland||%|
|1 motor vehicle||567||21||566,233||34.2|
|2 motor vehicles||1,250||46.2||620,096||37.4|
|3 or more vehicles||794||29.4||315,106||19|
|Number of motor vehicles not stated||40||1.5||56,263||3.4|
So that was a big tick for Bridgeman Downs.
But car counting can also be applied to identify the type of property you should buy within Bridgeman Downs as well.
For example, we selected particular townhouse developments based on multiple criteria, and among them was adequate private car accommodation.
Because the proportion of two-vehicle household in Bridgeman Downs is a dominant 46.2 per cent.
We want our clients’ assets to appeal to the largest potential renter and end-buyer base possible, so there was no question that any property purchased must allow for at least two vehicles to be housed.
It blows the end-user pool wide open, because even one-car households appreciate the extra car spot – which could be used for storage, workshop or to even create additional ‘living space’.
The added value of that additional car space in Bridgeman Downs is substantially more than the cost of allowing for it in the original build, and investors who’re purchasing in a complex with single-garage townhouses will find themselves far more illiquid in terms of demand.
In some complexes, we even purposefully seek private access, double-width driveways to the townhouse. Why? Because, if they have the right dimensions, another one or two private uncovered spaces can be the result.
Car accommodation is just one of many measures we consider in assessing investment potential, but its importance is dismissed by other advisors all too often.
So, don’t be fooled into sticking with the same fundamentals time and again, and only getting a retrospective view of a suburb’s property market potential. Instead, seek leading indicators that will ensure you are buying the right property in the right location for excellent gains over the long term.
Working with a professional QPIA ® will assist you in buying the right investment for your first step or next step into property investment.
Richard Crabb, ASPIRE Property Advisor Network, 11 August 2020