When it comes to specific real estate markets, most information focuses on the large picture or macro performance of a town or city.
Although this is an excellent indicator, we must also consider the success of a specific property asset class inside that macro market. Variables might include the quality of fixtures and fittings, the design (including the kind and size of the property), the aspect, the location, and the proximity to amenities.
Micro markets are smaller markets that are within a market, for example, between the broader areas like neighbourhoods or smaller localized sections of the city.
When it comes to micro factors like the ones described above, the issue for an investor is that the fundamentals will vary dramatically from suburb to suburb. As a result, a marriage of micro factors and macro performance is necessary.
The Blue Wealth research model helps property investors by ensuring they buy in the right area (macro) and the right property (micro).
For example:
Assume that data shows that an increasing number of highly compensated professionals working sixty-hour weeks are choosing to live alone in suburb X. There is a limited amount of suitable housing for these people. What kind of property will this demographic segment look for? What effect will this have on the values of these specific properties?
In the example above, questions that a potential supplier of housing should ask themselves will include:
- Will residents be inclined to desire proximity to work?
- Will residents have time to maintain the property?
- Will residents need amenities like eateries?
- Will residents prefer higher-end finishes?
The demographic characteristics will play a significant role in determining the relevant supply required now and in the future. Investors may need to reconsider preconceived notions from decades ago that support the ‘quarter acre plot in the suburbs.’
