Real estate investment: Spotting high-growth potentials

By Nicole Comendador

December 05 2023
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Investing in real estate has long been a favoured approach for Australians looking to grow their wealth.

real estate investment spotting high growth potentials

However, not all property investments are created equal, and identifying high-growth potentials is key to maximising returns.

Here’s what to look for when searching for a real estate investment with high-growth prospects.

Real estate investment: Spotting high-growth potentials

1. Emerging suburbs

High-growth potential is often found in emerging suburbs. These are areas that may currently sit under the radar but are primed for future development.

They might be characterised by new infrastructure projects, such as public transport expansions or shopping centres, which can boost property values.

Look for suburbs where the government or private sector is investing in development, and property prices are still relatively low compared to surrounding areas.

2. Demographic shifts

Demographic trends can be powerful indicators of real estate growth. Suburbs that attract young professionals, families, or retirees may experience demand that outpaces supply, driving property values up.

Monitor population growth, changes in household income, and shifts in age demographics. An increase in high-income residents or a growing population can be signs that an area is on the up.

3. Rental yield and vacancy rates

Investigate areas with strong rental yields and low vacancy rates. A high rental yield suggests a strong rental market, which can provide good cash flow.

Low vacancy rates indicate that demand for rental properties is outstripping supply, which may push rents and property values higher.

4. Zoning changes

Changes in zoning regulations can significantly impact property values. A shift from rural to residential zoning, for instance, can increase land value overnight.

Stay abreast of local council plans and proposals, and consider areas where zoning changes are likely to occur in the future.

5. Lifestyle factors

Properties in areas with attractive lifestyle factors tend to have high growth potential. This includes proximity to beaches, parks, good schools, cafes and restaurants, and other amenities.

Suburbs that offer an appealing lifestyle can attract a steady influx of buyers and tenants willing to pay a premium.

6. Market cycle timing

Understanding where a suburb is in the property market cycle is crucial. Buying at the bottom of the cycle when prices are lower and selling at the peak can maximise growth potential.

Analyse historical price trends and consider seeking advice from a property economist or advisor to identify the right time to invest.

7. Infrastructure and transport connectivity

Good infrastructure and transport links are magnets for growth. New highways, rail links, and improvements to public amenities can make a suburb more accessible and desirable. Keep an eye out for government announcements on transport and infrastructure spending.

8. Supply constraints

Areas with limited land release or strict planning controls can experience rapid price increases due to supply constraints. Waterfront locations or suburbs bordering national parks, where development is limited, can be particularly high-growth areas.

9. Economic growth

Look for areas with diverse and growing economies. Regions that are dependent on a single industry can be risky if that industry falters. However, suburbs with a mix of industries, including healthcare, education, and technology, can offer more stability and growth potential.

10. Expert opinions

Lastly, don’t underestimate the value of expert opinions. Real estate agents, property analysts, and financial advisors who specialise in property can provide insights that are not immediately apparent to the average investor. They can identify the subtle nuances that indicate an area has high growth potential.

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Investing in real estate with high-growth potential requires research, patience, and sometimes, a bit of foresight. By paying attention to market trends, demographic shifts, and local development, investors can make informed decisions.

It’s important to perform due diligence, consider long-term trends, and not be swayed by short-term fluctuations. Remember, in real estate, time in the market is often more important than timing the market.

With careful consideration and strategic planning, investors can spot and capitalise on high-growth real estate investments.

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