The top 5 indicators a property market is on the rise
In 2011, eccentric billionaire David Walsh opened the Museum of Old and New Art (Mona) in Hobart. Fast forward 7 years and ‘the Mona effect’ has produced one of Australia’s hottest housing markets, with Hobart up an incredible 13.0% in a single year.
Of course, we can’t all invest near world-class museums, so we’ve compiled a list of realistic things to look out for to help get you on the property ladder in a rising housing market *.
1. Look at the people
Demographics can be a huge indicator towards a ‘hot’ market.
There’s heaps of stats (available via the ABS) as to what makes the ‘ultimate gentrifier’, but if you were to see an increase in 30-40 year old professionals moving into an undesirable neighbourhood, you’d be on the right track. The same research also suggests looking for an increase in couples with children and an increase in people who lived at a different address 5 years ago. You could also look for whether average income growth in the area has increased faster than its surrounds (and sits in the top 10% of income growth rates in the entire city). All this data paints a picture of how an area is changing and is readily available for you to deep-dive into yourself.
2. Look at the prices
If demographics make up one side of the gentrification coin, hard numbers make up the other.
You might think property prices are the most obvious place to start, but any significant increase in price means you’re probably too late to the party. An earlier indicator might be the Active Days on Market (ADoM) – markets that are heating up will exhibit a sharp decline to around >30 days (when selling at the median house price).
You can also look at the absorption rate, or the number of houses currently on the market, divided by the number of properties under contract (purchased, but not yet signed for). This shows how long it would take to sell off the entire market at the current rate, so a slow sales rate would indicate a buyer’s market.
3. Look for clues (in the form of ‘newness’)
Emerging markets don’t have giant ‘buy here’ billboards at their doorstep. The signs of life are more subtle: it may be an increasing number of renovated houses, more cafés and restaurants, more services like grocery stores or even new apartment blocks sprouting up in the area.
Pro tip: New, larger-scale developments can typically take up to (and over) a year to complete. A developer must have confidence in the local area to play with that much time!
4. Look for new infrastructure
New infrastructure projects in the area can be a huge sign of an upcoming market. Look out for transport initiatives like a new train line or motorway, or a recreational project like a new park. Any large-scale development that will rapidly change the accessibility or liveability of a new area can bring renewed life to its housing market.
Take Ipswich for example: Once a city living in Brisbane’s shadow, it’s now poised to become Queensland’s fastest growing city for the next 25 years thanks to enhanced transport links, cheaper median prices and the growth of ‘work from home’ arrangements that reduce the burden of commuting to the city (a Greg Norman designed golf course also helps).
5. Look at the suburb next door
If you’ve just missed out on buying in that hot new suburb, it’s always good to look next door. The desire of so many to live in one suburb may have what’s called the ‘ripple effect’ on neighbouring ‘hoods, and could be a great way to get an early foot in the door.
A good way to measure this is to weigh up median property values between neighbouring suburbs. Look for a variation – if it’s more than 5% or 10%, you could be looking at a ‘ripple’ suburb. Monitor this over a few quarters until you’re sure you’re looking at a winner, then you can start searching for properties within your budget.
Arming yourself with as much info as possible during the house-hunting process (and we mean really getting your investigator/researcher hat on) is the best prep you can do to help secure a dream home for a dream price.
* Local billionaires not included