One of the key drivers of property growth on the Blue Wealth research model is economics and employment. The theory behind this is simple: the more jobs, money and as a result people in an area, the more demand for residential accommodation.
Identifying these areas is simple – the census provides (relatively) accurate information on median incomes on personal, household and family bases. However, simply finding an area where people have high incomes doesn’t mean that area is a good place to invest. We all know the wealthiest suburbs in the country, but buying an investment property there is usually not an option. Poorer yields aside, these areas are simply out of reach for many investors, and in fact for most Australians, as just 5.3 per cent of homes purchased during 2012 were over $1 million (and only 0.9 per cent over $2 million).
Appealing to the mass market will give you the greatest chance of growth in the future, and as 90 per cent of buyers purchased properties worth less than $800,000 during 2012, this is the best focus area.
Looking in detail at economics and employment, between the 2006 and 2011 Censuses Australia’s median household income increased by 20 per cent, up to approximately $1,000 per week. Areas worth a closer look are those where income growth has been higher than this average figure without a corresponding increase in median prices. The logic here is that the more money people have in the suburb the more they can spend on housing, whether to purchase or as a rental increase. This factor played a part in our recommendations in West End and South Brisbane, both of which had increases of 52 and 50 per cent respectively, more than double the national figure.
This higher than average increase could occur for a number of reasons, whether it’s a new, well paid employment hub (such as a resource city) or a shift in the local demographic (those inner city locations that were once ugly ducklings).
Ultimately, the area makes up just one of the factors in a good investment; the product is often more important. But if you are investing in an area where the income growth has been double the national average, then this is a solid start.
