What’s the best place to buy an investment property?

September 10, 2019

They say that 80% of a property’s price growth is based on its location, so picking the right suburb is arguably more important than picking the right home.

That prompts the obvious question – what’s the best place to buy an investment property?

In other words, which locations are likely to deliver the best capital growth over the long term?

Sadly, we don’t have any postcodes to give you. That’s because the ‘best’ location always changes due to three variables:

  • When you plan to buy
  • How much you plan to spend
  • How long you plan to hold the property for

The best location for someone who wants to buy a $300,000 investment property in 2019 that they hold for 15 years will be different to the best location for someone who wants to buy a $1 million home in 2020 and then hold it forever.

Property investment is all about supply and demand

While we can’t give you a list of hotspots, what we can do is explain the fundamentals you should bear in mind as you research your investment property purchase.

Long-term price growth is based on two main factors – supply and demand. Some property investors make the mistake of focusing just on demand, but supply is equally important. That’s because the two move up and down together like a seesaw:

  • More demand = less supply
  • More supply = less demand

As a property investor, you want to buy into a suburb where, over the long term, demand increases faster than supply.

By the way, don’t assume that bigger is always better.

For example, in the 15 years to March 2019, the median house price increased 62% in mighty Sydney but 133% in little Hobart, according to the Australian Bureau of Statistics (ABS).

Meanwhile, house prices rose by more in regional Queensland (90%) than Brisbane (75%).

Get information of key suburb data on Soho

Searching for single suburb on Soho, gives you an overview of key information such as median price as well as average yield

Jobs growth can have a big impact on property prices

Just as price growth is based on supply and demand, so supply and demand are influenced by a range of factors. They include:

  • Jobs growth
  • Economic development
  • Infrastructure pipelines
  • Migration
  • Residential construction
  • Zoning rules

Jobs growth is arguably the most important of these factors, because Australians want to live near jobs. If a city or town adds lots of jobs, people will move there; if a city or town loses lots of jobs, people will leave. So it makes sense to buy your investment property in an area you believe has strong long-term employment prospects.

You also need to consider economic development and infrastructure plans. Is the community investing in projects that will attract business – and, with it, jobs?

Migration data from the ABS are another thing to consider. These can be a mixed bag. For example, last year, 97,035 Australians moved into New South Wales – but 118,932 Australians left the state. So NSW had a net interstate migration loss of 21,897 people. However, this was offset by the 91,999 people who moved to NSW from overseas.

Housing supply also needs to figure in your research. How many new builds has the local council approved? How much residential construction does the council want over the long term?

And are the zoning laws pro-development or anti-development?

You can outsource your property purchase to an expert

Picking the right area to buy an investment property, then, is more about forecasting what’s going to happen in the future than understanding what’s happened in the past.

Clearly, it’s a hard thing to get right, because there are so many variables to consider.

That’s why an increasing number of Australians are turning to buyer’s agents – people like Arjun Paliwal, John Comino and Chris Skurrie. These are property professionals who specialise in researching and analysing all that data, so you don’t have to.

Here are some buyer’s agent to follow on Soho

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