You know me: I love data and research. I can’t get enough of it.
So this recent article from Business Insider Australia definitely piqued my interest, as it goes into some detail to explain the current dynamics that are in play within the Australian property market.
More specifically, it discusses the risk of a property price bubble (particularly in Sydney and Melbourne), and warns that investors should not “expect the good times to last forever”.
Most experienced investors understand the property markets move in cycles; that just because the suburb where you own property experienced 15 per cent growth last year, that doesn’t necessarily mean it will grow at that level this year.
I think most people also recognise that the old cliché claiming “property prices double every 7 to 10 years” is simply not true in the modern market.
Still, there’s a chance that many investors will be burnt by the price explosion in Sydney, if they rush in to buy without doing thorough due diligence on their chosen suburb.
I always recommend that investors review an area’s long term capital growth. While it’s great that a suburb has grown in value in the last 12 months, I want to see evidenced of historical growth – so how has it performed over the last three years? Five years? Ten years?
These are the types of statistics you need to analyse when researching a potential property purchase, along with a whole host of other markers of due diligence; my own personal research process generally ends up creating at least 40 pages of data, statistics and information for me to review before making a decision.
Remember: knowledge is power. The more research you do, the more evidence you can gather to support your suburb’s growth potential, which minimises your risk of buying a property that fails to live up to your expectations.
Til next time, happy investing!