Step Two:
Understanding the local market

Economic and employment diversity: It’s important that investors invest into areas that have a strong and diverse employment base. This includes understanding employment diversity, infrastructure spending and projected job growth.

Investors should tread carefully with single industry markets such as mining towns or holiday-only destinations, as these markets tend to be subject to much greater fluctuations due to their over-reliance on a single industry.

The below table shows the Newcastle employment market. This market was traditionally reliant on industrial company’s such as BHP, however it has since transitioned into a diverse employment base. The largest employment sector is now healthcare which is typically a very sustainable industry and not generally subject to market fluctuations.

Top 5 Industries of Employment – Newcastle Region

Supply & demand: Understanding future supply & local zoning rules

Investors should focus on identifying property markets with limited supply and that are in high demand from local buyers. Suburbs where supply levels are higher, tend to not perform as well as those with limited supply and high demand.

It is possible to come across a suburb that has an over-supply of one property type, such as an apartment, but has an undersupply of other property types such as townhouses or houses.

Below is an example of two, 2-bedroom apartments purchased and sold at the exact same dates within the Sydney market and are located 7.5km apart. The key difference here is the amount of new property supply which was delivered in Zetland, versus the more established area of Maroubra which has much tighter planning controls for new property supply.

Address: 27/36 McKeon Street, Maroubra
Purchase Price: $875,000
Purchase Date: November 2009
Sale Price: $1,626,000
Sale Date: August 2018

Capital Growth: 85%
Projected New Apartments (2016-20): 585 units

Address: 503/4 Ascot Avenue, Zetland
Purchase Price: $670,000
Purchase Date: November 2009
Sale Price: $865,000
Sale Date: August 2018

Capital Growth: 29%
Projected New Apartments (2016-22): 5,571 units

Step 1:
Understanding the local market
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Step 3:
Selecting a property that appeals to locals
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