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How to find a property in a booming market

How to locate the right investment property in a booming market

In a booming property market, it may seem like investing in a property – any property – will always be a good idea. The reality is that just because a market is booming, doesn’t mean it will continue to do so indefinitely. When the market eventually stabilises or cools, if you’ve made a subpar investment decision, it will come back to haunt you. Just because a property market is hot, doesn’t mean you should settle for second best. 

So, how should you select an investment property in a booming market? 

Avoid FOMO 

When a market is experiencing strong growth, it’s common for would-be investors to experience FOMO (fear of missing out). Attending multiple open houses or being priced out at auctions week after week can start to take its toll. With low supply and high competition for properties, it may be tempting to invest in the first property you can secure. 

While it generally isn’t a good idea to wait too long before getting into the market, it’s also not a good idea to rush the decision without doing your due diligence and research. It’s all about getting the balance right and making a logical and unemotional decision in a timely manner. This will ensure you identify the best possible properties, in the best possible locations, with the best possible growth prospects. 

For example, investor interest in Brisbane is growing, thanks to strong population growth and the 2032 Olympics now on the horizon. However, that doesn’t mean that all suburbs in SEQ will perform equally. Some suburbs like Hamilton will still be vulnerable to oversupply due to a high number of high-density apartment complexes, whereas other inner city suburbs like Paddington with low supply and high demand are likely to be consistent performers. If you jump too soon into the wrong suburb or property type, you could ultimately lose out in the long run. 

By setting aside your FOMO and approaching your investment decision with clarity, you can set yourself up much better for the long-term. 

Don’t forget the fundamentals 

Even in a high-performing property market, or one on the cusp of significant growth, there will still be sub-par investment opportunities that won’t pay out over the long-term. To avoid this, you need to consider the fundamentals around what makes a property and location a good investment choice. This may include: 

  • Supply and demand – Do your research into vacancy rates, the number of properties on the market and average days on market to assess the current supply and demand levels. If you’re finding that most areas are experiencing low supply and high demand due to it being a booming market, it’s important to remember this may not last. There’s a difference between natural demand and artificial demand. For example, areas with a lot of high-density apartment complexes or greenfields suburbs with no limits on new land supply can quickly become over-supplied as natural demand lags, impacting property values. 
  • Population growth and market cycles – The more people moving to an area, the more demand for housing in that location. Tracking overseas and interstate migration is an important measure when trying to gauge what cycle a specific property market in entering. For example, many locations in South East Queensland have attracted a high level of interstate migration which has put pressure on those markets from a rental and price perspective. Conversely, a lack of overseas students and the exodus of people from Victoria during the pandemic has had a negative on parts of the Melbourne property market, particularly the inner city apartment markets.  
  • Owner-occupiers vs. investors – One way to avoid areas vulnerable to oversupply is to seek out locations and property types which attract a high proportion of owner-occupiers. In these areas there will generally be more competition for rentals as rental supply is limited due to the high percentage of owners. You should also look to invest in a specific property that has desirable features such as great natural light, higher-quality finishing’s and are larger in size.
  • Rental returns – Rental yield refers to your rental income as a percentage of the value of the property. The lower the rental yield, the higher the potential out of pocket costs for running the property. A high rental yield can often lead to property that breaks even or is even cash flow positive.
  • Rental demand – In addition to understanding rental yield, you also need to understand rental demand. There’s no point securing a property with a high yield, only to find it difficult to find a tenant. Areas which have relied on international students previously for example, may currently be experiencing low rental demand. 
  • Infrastructure – Investment in infrastructure such as hospitals, schools, airports or commercial precincts can signal prospective population growth and therefore capital growth. 
  • Employment – Areas with strong and diverse job prospects will attract population growth, capital growth and rental demand. Just ensure that the area doesn’t rely on one or two industries (such as mining towns) to ensure you minimise the risk of a decline in that industry. 
  • Livability – Areas with good public transport links, schools, shops, and restaurants and cafes will tend to perform better. Look at the walkability of the area and the proximity to employment opportunities. 

Seek the right help 

It’s important to get the right team on your side to ensure you make the right property investment decision. This will help you avoid the traps which can leave you with a less desirable and valuable investment property. 

A property investment firm, like Binnari Property, will source high value investment opportunities on your behalf, at no cost to you, based on extensive research. Not only does this take the guesswork out of the process, it saves you a significant amount of time and energy. 

A buyers agent can assist you to find a property in an area you’re unfamiliar with, this is particularly useful if you’re seeking to invest interstate and aren’t familiar with the market. 

Your mortgage broker can help you understand how much you can borrow and what you can afford. They can also help you leverage untapped equity you may currently have in your home which you can borrow against to buy an investment property without the need for a large deposit. Equity is an excellent vehicle for building wealth through making the path to property investment an easier one. 

Looking to invest and need some guidance on which properties will give you the best return? Chat to us today to find the right property investment for you. 

Binnari Property is open for business remotely during the NSW lockdowns. We are cloud-based, allowing us to continue operating as usual, including meeting with you virtually via Zoom and undertaking signatures for documents electronically when possible. Get in touch with us today to discuss your property investment needs.