Before You Buy: The Six Fundamentals Every Property Investor Must Check – Tim Graham General Manager of Hotspotting 


It’s true that anyone with the right finances can invest in property, but not everyone can invest in property successfully. 

Unfortunately, there are still too many investors who choose with their hearts, buying something that “looks nice” or in a “hot market” they read about in the media. 

While occasionally even that approach will pay off for some, for most it won’t. 

Whether it is one property or ten in your portfolio, the golden rule is that property investment is a business and it should be treated as such.  

Like any business decision, pros and cons need to be weighed up, research needs to be done and experts engaged. 

There are six key pieces of research that any prospective property investor should take into account before buying – and media reports about boom suburbs is not one of them. 

You can be guaranteed if you are reading about a suburb booming because of strong median price growth, you’ve already missed the boat. That growth started six months ago.  

Instead of looking at where the growth has already happened, investors need to be looking for where it is about to happen.  

These are the often-overlooked but important metrics which should help investors determine the next markets to experience growth. 

Rising Transaction Levels  

Rising transaction levels is a powerful indicator of where property prices are about to grow. Increasing sales levels over consecutive quarters show that demand is increasing in a particular area. Rising demand and the competition that comes with it are generally a precursor to price growth. Sales activity is the canary in the coal mine. It’s the earliest warning that something is changing. The buyers who watch rising demand closely are the ones who buy before the price surge arrives. 

Market Depth 

Markets that record few transactions every year are problematic for a number of reasons. Few transactions mean that data can be unreliable, with one or two unusual transactions distorting the suburb profile. It can also mean that when it comes time to sell, finding a buyer can take a lot longer as the interest just isn’t there. Hotspotting recommends only considering areas with at least 50 sales in the past 12 months, which indicates there is some level of demand. 

Low Vacancy Rates  

This is an important metric for investors. When vacancy rates are low and there’s intense competition for rentals, rents rise. And decent rents are the lifeblood of property investment, it’s what pays the mortgage and enables investors to hold on to an asset for longer, allowing its value to rise. 

Employment nodes 

Follow the jobs trail. Most people want to live fairly close to where they work, so investors should focus on areas with strong job nodes. Hospitals, universities, major shopping centres and industrial estates all generally have very large staff numbers, and people will always move toward better work, better pay and better prospects. 

Infrastructure spending 

Proposed infrastructure spending is another strong indicator that a location is set to take off. Whether it is airport upgrades, highways, train stations or hospitals, infrastructure provides new amenities and improved connectivity. During the construction phase, workers move in to build the infrastructure and then on completion, these areas draw new residents chasing jobs, better amenities and liveability. 

Affordability 

Affordability, while it is becoming harder to find, is a key metric for successful investors – there needs to be some room for upside. But affordability alone is not enough. The affordable properties need to be in towns with diverse economies. Locations dominated by one industry sector, whether that be mining, agriculture or tourism, rarely make a good investment. 

History is full of tales of investors who lost big money buying in what were once booming mining towns.  A good example is Moranbah in Queensland, where investors paid a fortune to secure very ordinary homes, encouraged by the fact that mining companies were forking out thousands of dollars a week to rent accommodation for workers. That was until the resource’s downturn hit and the demand disappeared virtually overnight. Medians, which had reached $750,000 at the height of the boom, is now, more than ten years later, just $387,000. 

More than a decade after the boom, the median price, which had peaked at $750,000, is currently only $387,000. 

Property investment is not about guesswork. It’s not about buying somewhere that a friend at a barbecue told you was going to take off. It’s about understanding the market you are buying in and whether or not it has the fundamentals in place for future price growth and demand. 

Follow the evidence, do the research and reap the rewards.