Investing in property requires thorough research, and key data like vacancy rates, unemployment statistics, and demographic information are vital to understanding the market. But which one is more important?
Let’s explore why each of these factors plays a crucial role in deciding where to invest in property.
Vacancy Rates
Vacancy rates indicate the level of tenant demand in a given area. Low vacancy rates suggest that rental properties in the area are highly sought after, making it easier for investors to maintain high occupancy rates and steady rental income.
For instance, Australia’s current rental market is experiencing low vacancy rates due to population growth and limited supply, particularly in major cities like Sydney and Melbourne.
This high demand is driving rental prices upwards, making it favorable for investors looking for long-term capital growth. However, areas with high vacancy rates may result in longer periods of unoccupied properties, which can reduce profitability.
Desirable locations usually have most (or all) of the following characteristics:
- A good public perception
- Close to good schools
- Good shopping facilities
- Close to the CBD
- Good public transport facilities
- Plenty of things for people to do on the weekend (like restaurants, cafes, entertainment venues, parks etc.)
To understand how vacancy rates could impact your decision, explore the detailed breakdown in The Real Cost of Buying an Investment Property.
Unemployment Statistics
Regions with low unemployment rates generally have a stable economy, which translates to steady tenant demand. Areas with higher employment levels attract more tenants who are financially secure, reducing the risk of missed rent payments or frequent turnover.
In contrast, investing in areas with high unemployment rates can pose risks. Tenants might struggle to pay rent consistently, leading to potential cash flow issues for property owners.
Currently, Australia’s unemployment rate is projected to increase to 4.5% by mid-2025, which could impact tenant stability in certain regions. Investors should be cautious of these trends when choosing a location for their property.
Demographic Information
Demographic data gives insight into the population makeup of a location, helping you understand your target market for potential tenants.
This information is freely available online and can be compiled from several sources, including real estate websites and the Australian Bureau of Statistics.
This includes details such as:
- The average age and income levels of a suburb’s residents
- The population of the suburb (including growth rates over time)
- The proportion of residents that are employed in broad categories (e.g. white-collar workers versus trade-related occupations)
- The average number of people per household
- The proportion of residents that are renting versus buying versus owning
- The average prices for houses, townhouses or units/apartments in the area (including growth rates over time)
- The proportion of houses, townhouses, and units/apartments
For example, a suburb with a high number of younger professionals may offer better rental yields, while an area with an aging population may see fewer tenants but potentially more home buyers.
Understanding the demographic profile helps investors tailor their property type to the right tenant pool.
If you want to know how zoning regulations affect demographics and property value, check out How to Find the Zoning of a Property in Brisbane.
Which Data Is More Important?
The importance of vacancy rates, unemployment, and demographics depends on the local market conditions.
For instance, low vacancy rates and unemployment can boost an area’s appeal, but these factors can shift quickly with the arrival of new infrastructure developments or commercial projects that create jobs and increase housing demand.
In 2024, Australia’s housing market is expected to see continued growth in regions with strong population increases and high demand for rental properties, especially in capital cities.
However, new housing developments in certain areas could lead to higher vacancy rates as more properties become available, impacting tenant demand.
The key to making an informed decision is conducting thorough location research, considering all three factors, and staying updated on local council plans and zoning regulations.
Doing so will help ensure your investment yields strong returns over time.
By analyzing vacancy rates, unemployment, and demographic information, you can make well-informed decisions on investment properties and maximize your returns. Learn more about key factors influencing property investments in The Real Cost of Buying an Investment Property.
FAQs on Vacancy Rate, Unemployment And Demographics
What is the most important statistic for unemployment?
The Employment-to-Population Ratio is a key measure that indicates which population segments are experiencing job gains or losses. It complements the unemployment rate in assessing labour market health, even with small changes.
Which demographic has the highest unemployment rate?
Black people and Native Americans have the highest unemployment rates among racial and ethnic groups. In contrast, Asian Americans and white people have the lowest unemployment rates.
Why is the unemployment rate important for the government and population?
The unemployment rate serves as a key indicator of the economy’s performance. A high rate suggests an oversupplied labour market with limited job opportunities.
What is the relationship between job vacancies and the unemployment rate?
In NSW, there are about 3.4 unemployed people for every job vacancy, making it the easiest state to find work. Victoria follows with 4.6 unemployed per vacancy, while other states have higher ratios.
