Looking for changes in these key areas of the market will get you ahead of the pack.
Blogger: Josh Masters, director, BuySide buyer's agency
With all the different aspects of property investment, it’s easy to lose track of what’s important in order to make money. Sometimes it’s best to keep it simple, so I often find that the best way to identify growth is to look out for one thing: change.
Changing demographics, changing laws, changing landscapes – there are a multitude of changes that are worth looking further into to see how the market might react and how you can be first to capitalise. Here are five changes worth keeping an eye out for:
From roads to shopping centres, rail lines to light rail, increased infrastructure brings people together and increases trade and growth in the area. Take Toowoomba in Queensland for example, which has seen an increase in popularity due to the plan for the Toowoomba Second Range Crossing. The project, which was given the green light in 2015/16 Budget, is expected to support more than 1,800 full-time equivalent jobs during the three-and-a-half year construction phase. It is also anticipated that through improved freight movement, the crossing will increase economic activity in the region by $2.4 billion over 30 years.
New rail lines or light rail can also be good projects to find out about in the early stages. While the tracks themselves aren't as important as where they stop, they can indicate the likely direction that future growth and development might take as the population expands.
In NSW, the Sydney CBD and South East Light Rail project is going to provide streamlined transportation links between the south and eastern suburbs through to the CBD, carrying five times more passengers than traditional buses that will no doubt increase popularity around the new station hubs.
Keep in mind, however, that funding for projects like these can often change depending on who is in government at the time and how the budget is looking.
Rezoning is when the councils change their requirements around the use of the land and often around the density of the living spaces allowed in that area in order to allow for infrastructure projects and planning developments.
In October 2014 for example, developers were successful in gaining approval for putting in a rezoning proposal to NSW Government for the Victoria Road end of Marrickville for a proposed 3,000 dwellings, which will no doubt increase the amenity in this area.
Rezoning can also happen at the outskirts of cities or regional centres where land releases are made available and developers buy up large areas of what was once farmland to build a new housing subdivision. If you’re not carrying that sort of budget though, new train lines and infrastructure can mean that what was once a suburban sprawl is now the future hub for transport, shops and unit blocks. Think North West Rail Link, where the new train line is set to help boost the population for the Hills District from 177,000 in 2011, to 280,900 by 2031.
Targeting houses with large blocks in areas close to future stations can result in boom times for their owners who capitalise on the higher-density housing allowances that often happen near transportation hubs.
While this doesn't happen often, changes to the law such as those that occurred in the SMSF space meant that many people now had control of their retirement fund and were looking to move it away from the industry funds. As a result, many studio apartments and one-bedders that were traditionally shunned by lenders who felt there was too much risk in such small premises found a willing and able market in the SMSF space, where buyers had enough cash to pay for the unit outright and didn't rely on having to borrow money.
In hindsight, this makes perfect sense given the high yields that SMSFs were chasing and that the studios and one-bedders provided, and we all know Australians love to buy property.
The question is, what new legislation is coming? What will be the knock-on effects in the marketplace that could potentially move funds from one market to another that you could capitalise on?
Today mining is one of the largest economies in Australian trade but it wasn't always so. Towns like Karratha, Moranbah and Port Hedland were sleepy hollows until the mining companies set up shop in their front yard. The rest, as they say, is history.
We have since seen property values in mining towns increase tenfold over a space of 15 years, and for those investors who saw the writing on the wall before everyone else have made themselves a small fortune.
Of course, things are different now and we have certainly seen the market cool off. In post-boom Moranbah, a coalmining town about 190km west of Mackay, the median house value dropped 66 per cent since 2012, from $404,006 to $251,933, while Port Hedland fell nearly 40 per cent in the same two years as well. Where market changes giveth, they can also taketh away.
What is important here though is the emergence of potential new economies and the vast resources that will be driven into the next sector. As investors, we need to be asking ourselves where the new growth will come from in our region or state, and how we can take advantage of it. Will it be well-located industrial areas that get transformed into new tech hubs, or will it be the great deserts of Australia that can house a growing demand for solar infrastructure?
- Housing policy
Once the ghettos of the Australian community, housing commission (or social housing) has been undergoing its own changes over the years, with the government realising that large areas of low-income, underemployed youth does very little for the community at large.
As a result, many of these government-owned housing areas are slowly being sold off at prices reflecting the reputation of the area. Over time though, these properties are being renovated and new families are moving in, transforming a low-end neighbourhood and lifting the prices of all houses in the area. Walsh Bay is a great example, where once-terrace style council housing is now being transformed and the area boosted to become one of Sydney’s prime arts and performance districts.
Keeping an eye out for change in any area of the market is always a good exercise if you’re keen to spot the next opportunity, but don’t forget to ask yourself what the implications of that change will be and how it will have a flow-on effect down the line. You will also need to assess your own level of risk around investing in these areas and consider whether you’re open to a more speculative, early stage of investing. Ask yourself the right questions though, and you may uncover your own emerging market.