With an array of jargon and information, researching the property market can leave you umming and ahhing. To help you research the market efficiently and accurately, we’ve created this guide on how to research different investment suburbs.
While it’s not rocket science, researching the property market comes down to a range of factors, including supply and demand, economic and demographic trends, as well as keeping tabs on future developments that may be scheduled in the pipeline. We speak to the CEO of Metropole, Michael Yardney, for some insight.
You can leverage information offered by property data sources such as APM Price Finder, RP Data, realestate.com.au or Residex to help you understand different property markets.
While a lot of research focuses on what has happened in the past, Yardney says you should be more interested in “leading indicators”, which are predictors of what’s going to happen in the future: “I research using Core Logic, RP Data, Australian Property Monitors... there’s a lot of information from the Australian Bureau of Statistics (ABS) as well as some good research from SQM research and opinions from propertyupdate.com.au.”
In terms of approaching research, Yardney says you should take a top-down approach: “I start with the top: ‘How’s the national economy going?’ Then I look at the property cycles of individual states. While we all share the same low interest rates and the same federal government, each state is at its own stage of the property cycle. In other words, NSW has done very well in the last year in property. It created over 85,000 jobs in 2015 alone while the rest of Australia combined created 80,000 jobs. Employment growth, wages growth and consumer confidence are important factors to consider in local economies. So I look at which stage of its property cycle it is at to see what’s going on.
“As an investor, you have to look long term. Short-term market factors are important, but what’s more important is the big picture. If people get tied up in the micro, then they miss the macro. One of the things you can’t put on a spreadsheet is perspective.”
Additionally, most government websites provide reports or “community profiles” that disclose information about council plans, development projects or building regulations that can help you understand the supply and demand of the area as well as offering data to refine your search.
As mentioned above, there are many resources you can leverage to access market data for different regions, but below is an example of how you can access a suburb analysis report from Residex.
If you’d like to access a free suburb report, you can visit Residex. Simply enter your suburb (“Bondi, 2026, NSW”, for example) and the report will be downloaded in a PDF format within minutes.
You’ll then be presented with a comprehensive report with a breakdown of the median value of properties within the area, the number of people residing within the area and the number of properties within the suburb.
You can also view the demographics of the suburb, which details the spoken languages within the area (64% of people speak English in Bondi), the nature of homeownership (54% of people rent in Bondi) and the distribution of property types (69% of Bondi properties are units).
The suburb report also provides information for different property types, such as the median value, median weekly rental and capitalised annual yield over recent years.
While each person will have a different checklist for an investment suburb depending on their investment needs, you should consider the following when accessing the market profile of an area:
Supply and demand
Supply and demand are crucial indicators to consider when researching different investment areas. Yardney says: “What you should be looking at a suburb level is supply and demand. In other words, are there many people looking to move into this area and what are the new projects about to come out of the ground? Because, even if things are good today and vacancy rates are low, things can change. I know a number of suburbs in Melbourne, Sydney and Brisbane where in two years’ time there will be so many new off-the-plan projects that it will flood the market and create problems.
“I look for population growth because that’s going to influence demand, construction numbers and future plan projects, which will affect supply. I also consider demographics for a region, such as suburbs where residents have a high and increasing disposable income.
“I make sure there isn’t a lot of oversupply in the area. Currently, despite there being the right demographics in the middle-ring suburbs of Melbourne, there’s too much supply. All the new high-rise and off-the-plan projects means that there’s too much accommodation, which means it’s not going to create capital growth despite people having more income.”
You should consider a range of economic factors including disposable income and employment trends when researching different suburbs.
Employment growth, consumer confidence and finance trends
Yardney provides insight about some important ways to interpret economic indicators: “I’m looking for areas where people can afford to and are prepared to pay a premium to live. What pushes up property values is affordability; not because it’s cheap, but because people can afford to live there. I look for areas where there’s going to be employment growth, because that’s where wages growth is going to be. I also look for areas where there’s going to be consumer confidence. People don’t make large purchasing decisions unless they feel secure in their jobs and they’re generally confident about the future. I also look for finance pre-approval trends, which is a good leading indicator as to how many investors there are going to be in the future.”
“Everyone focuses on market data and they get it all wrong. The big drivers of capital growth are population growth and wealth.”
Average property prices and capital growth
The median property prices for an area can help you determine whether the offer you receive for a property is reasonable, which can give you some negotiating power and help you avoid overpaying.
Yardney says that you should look at properties that will outperform the averages in the area: “My strategy is to buy properties that are going to outperform the averages in capital growth. This has to do with past capital growth, which is why looking at areas and some of the reports from Residex and CoreLogic will give you historic capital growth information. But I also want to see areas that will have future capital growth, and that has to do with demographics. Every five years, the Australian Census measures demographic data for every postcode so you can see areas where there’s been higher wages growth, which translates to higher disposable income, and this pushes up demand.”
In terms of negotiating for the right price of a property, Yardney says it’s important to consider the comparability of different properties: “To get the right price, you’ve got to look at reports, but it’s difficult. When you get those reports online, you’ve got to ask how comparable are the properties? That’s answered by driving around and looking at properties, going to open inspections and getting a feel for what’s happening in the area.”
You should consider the market cycle of the suburb within your research. While you shouldn’t try to time the market, you don’t want to buy right near the peak of a growth cycle when there will be a lag before things move on again. Yardney says: “Ideally, you’d like to buy at the early stage of the upturn, but timing is not as critical. It’s more about your personal situation and when you feel ready to invest.
“The successful investors do well in good markets and bad, the unsuccessful investors do poorly in good markets and even worse in bad markets.”
Yardney adds that gentrification can help boost property prices in the long term: “We look for suburbs that are going through gentrification, where a suburb has gone past it’s use-by date and new people are moving in. The inner west of Sydney, such as the Marrickvilles that were once pretty grotty, have really changed... and the middle-ring suburbs of Melbourne are good examples of where gentrification is happening.”
As illustrated by the Residex data above, the demographic profile of an area can help you understand the type of people that live within the suburb, such as their gender, age, disposable income, as well as their behaviour, including whether they prefer to buy or rent.
The average income of people who live in the area is worth considering. This can help gauge whether their level of disposable income is likely to attract growth and development, such as new shops or other desirable facilities or infrastructure projects, which are likely to improve property values. You should look for areas where people are willing to pay a premium to live there, and where their disposable income is growing above the national average.
Yardney highlights the importance of considering resident needs of an area: “With demographics, you’ve got to think what sort of people want to live there. The one-bedroom apartment would be very convenient in some suburbs near hospitals and universities, but not good in other suburbs. You’ve got to have the appropriate accommodation for the sort of people who want them. How do people want to live?”
For instance, if the suburb has a relatively old demographic, then purchasing a unit without a lift or wheelchair access may not be feasible.
Location and proximity to amenities
To make a location desirable, it should be within close proximity to amenities and services. These may include parks, recreational areas, schools, hospitals and transport hubs.
“You have to know the districts within the suburbs. Most suburbs have 2-3 districts, where one property will be worth 20% more than the other, even if it’s got the same postcode. It could be because it’s on a main road or because it’s got a view, so that’s the sort of stuff you can’t get on the internet”, Yardney says.
“For a lot of the suburb data, you’ve got to go to open inspections, you’ve got to see what results of sales are; not what asking prices are, but what sale prices are, what sells and what rents. It’s hard to do when you’re only in the market for the short term, and that’s why a lot of investors are turning to buyer’s agents to represent them.”Back to top
How do you work out supply and demand?
Ideally, you should source suburbs where demand exceeds supply.
However, don’t fall into the trap of taking statistics at face value. You need to remember that statistics can be unreliable or inconsistent if you don’t put them into context.
To demonstrate, you might observe a vacancy rate of 10% in an area, but then notice that it could drop to 5% the following month. You need to think why this has occurred and whether the change is as significant as it seems. For instance, this might be because there are a small percentage of people residing within the area, so you should consider how relative this information is compared to other factors.
Keep in mind that the statistics and data you review will depend on your investment goal. For instance, you might be largely concerned with finding a market with positive capital growth, while another investor may want to consider rental yields as the domineering statistic. Some statistics or market trends you may want to consider include:
- Demand to supply ratio (DSR)
- Days on market (DOM)
- Ripple effect potential
- Vacancy rate
- Rental yield
- Auction clearance rates
How do I know when there is strong demand in a market?
The following could be indicators of a market where demand exceeds supply:
- Low DOM: If properties are on the market for a relatively shorter amount of time compared to other markets, this may indicate that properties are selling quickly and that there is strong demand in the suburb.
- Little change in asking price: If sellers don’t need to reduce their asking price in order to lock in a sale, this may suggest that buyers are competing against one another and willing to pay a higher price.
- Properties are selling: If the majority of properties that go to auction sell, this suggests that there is positive buyer sentiment in the area. Also, if properties are advertised with ‘open inspection’ times rather than private appointment, this indicates that there are a high number of interested buyers.
- Limited available property: This could suggest that buyers are snapping up properties quickly and that demand exceeds supply.
By drawing upon the knowledge and expertise of local bodies and professionals, you can make a more informed judgement about a suburb and whether or not it meets your investment goal.
Log on to the council website
You should check out the local council website to get a feel for any upcoming developments scheduled for the area. To gauge the future supply for the area, you should see whether any development applications have been put in place and examine the scale of these developments. For example, a development project for a housing estate could largely impact supply for the area.
On the flip side, certain council projects may also have an impact on the demand for property within a suburb. The following are examples of projects that could potentially boost demand:
- Transport improvements, such as wheelchair access or bicycle lanes
- Support of local business, such as networking events or free workshops
- Improving facilities, such as local pools, parks and recreational areas
What does future government expenditure look like?
You should check both state and federal government expenditure for an area. This can be done on sites such as infrastructure NSW.
Consider private expenditure too. Are large enterprises moving into the area? If so, are they contributing or detracting from the area? For instance, a local Bunnings or ANZ Bank may suggest that the suburb is expanding.
Speak with professionals
You should approach local agents, property developers, mortgage brokers and even residents to find out more about the area. It’s also a good idea to visit the area yourself so you can build a relationship with experts and get a feel for the suburb.
Although time-consuming, diligent and thorough research will put you in good stead to finding a suburb that will complement your investment strategy. If you forego research, you could risk making a poor investment choice.