The most effective supply and demand indicators for future growth.
We all know the basic premise of value growth in most industries is supply and demand. For the property market, demand is a property investor's best friend. To understand the state of supply and demand across markets in Australia, there are specific indicators to keep an eye on as you research. Here's our list of some of the indicators that you can monitor to get a detailed idea of supply and demand in a market.
Days on market (DOM)
The number of days that a property is on the market indicates how quickly properties are moving. As demand exceeds supply, the DOM will decrease, indicating a potential growth and in-demand suburb.
Discount to the sale price
Monitoring the sold price of properties and comparing it to its listing price will indicate the discount price on each property. As suburbs become more popular, the discount price will decrease.
Auction clearance rates (ACRs)
Auction clearance rates (ACRs) are a good indicator of the popularity of an area. When ACRs are high in an area, it's likely that many bidders are competing to purchase a property in the area. Higher ACRs are common in strong investment markets.
Proportion of renters vs owner-occupiers
The proportion of renters in an area indicates the number of renters in an area compared to the overall population of the area. The higher the proportion of renters, the more landlords you may need to compete with when you list your property for rent.
Vacancy rates will be low in areas that are in high demand for renters. In contrast, vacancy rates can be higher in less popular areas. Keeping track of vacancy rates compared to other factors such as rental prices, location, and demographics, is another good way to identify growth suburbs.
It's important to remember that there's no perfect suburb, but you can find a suburb that closely meets your desired price and growth projections and individual investing goals by taking these indicators into account.
Once you've found a specific market or property to monitor, make sure you're proactive about due diligence and talk to a trusted legal and financial advisor. This will help in identifying and mitigating risks as you change and grow your property portfolio. Remember, everyone has their own individual goals with their property portfolios so don't get distracted by the "next big thing." Instead, stick to your long-term goals and make sure any changes to your portfolio are aligned with these goals.