Australian property investors have had a fairly good run with returns on their investments over the last decade. So what causes prices to creep up?
Australian property investors have had a fairly good run with returns on their investments over the last decade. House prices have steadily continued to creep up; all but ensuring that smart investors receive a positive return on investment.
But what causes property prices to rise? And how can you spot the conditions that might indicate those rises?
In today's post we're going to talk a little about this.
Supply and Demand.
Ultimately rising (or falling!) property prices come down to one eternal law: where there are more people than available properties available prices will rise.
Essentially, if more than one person wants your property you're going to see the price rise as they bid against one another.
You can see this law in action at auctions, where there are plenty of people there will be fierce and high bids.
It's simple: increase demand, increase value.
Having good quality infrastructure nearby is a surefire way to increase the demand for your property.
Ensuring you're close to great public transport, local community hubs, workplaces, shopping etc. is a great way to get more people interested in the property.
You can also look at areas where the Government is investing money, or planning to invest, in infrastructure.
Governments love an infrastructure splurge to win voters over, so every few years you'll have a reliable indication of where people will want to live.
If there seems to be development, or talk of development, you can usually count on a surge of demand in the area later on.
While infrastructure and the supply demand equation are largely out of your hands, this one isn't.
Once an area has lots of people interested, you need to make your property stand out. So this means you've got to work on improving not just the amenities of the property, but the aesthetics.
Having a functional, excellent looking property gives you the edge over properties in your area.
As an investor you should look out for areas where a lot of homeowners are renovating, this could be a sign that demand is at a good level.
So you've noticed that demand in one area seems to be going up, Governments have begun some infrastructure projects, and some houses seem to be looking nicer than usual.
Well they're all good signs that an area is going to soon appreciate, but it is also a sign that surrounding areas are going to appreciate also.
Since people are going to be priced out of the most in demand area some of them will look nearby, causing prices in those nearby areas to rise as well.
While an area that has been seeing constant increases in values seems like an attractive option you should never buy simply because of that.
You need to consider all the factors above, smart investors don't just jump in.
We always recommend following our Plan, Prepare, Invest, Assess method.
Get in touch with us if you want an expert to help you invest with confidence.