Expert Bust #26 Investment grade props

Obviously I researched before buying my properties. I didn't think that needed to be clarified. The alternative was to pick them at random.

 

It's not really that obvious. There's lots of people that get on here & it appears that their pick of property was rather random, with little to no research.

 

Please continue @datageek - lots of data and stats to disprove theories and back a position.
Helpful & appreciated!

 

Thank you for your post. Really interesting insights.

So, can we say the key take aways from your data analysis are -
1. It is mainly about supply and demand for property in a given suburb and not about the property (and it's features) itself
2. It doesn't really matter which area you pick for investment as long as the area is showing some growth (irrespective of what's driving the growth) and keeping the personal bias aside
3. The above pattern is reflected for all suburbs/areas over medium to long term (both peaks and troughs cancelling each other in an upward trend)

Does this mean that the idea of an "investment grade" property is essentially a myth? And one should only focus on investment grade suburbs and timing?

 

1. Yes
2. Yes
3. Yes

The upshot of it all is that an "investment grade" property/suburb/area/city is one in which demand exceeds supply since that's the only thing driving prices.

 

The million dollar question (pun intended) then is what does one have to consider first (also chicken and egg question) - Price growth or demand growth? If it's demand then what are the data points to look at to assess that demand is going to rise or keep rising?

And then does it just come down to the well documented property cycles and where is a suburb/city/state in the property cycle?

 

It's the balance between supply and demand you want to monitor. Really, you want imbalance, where demand exceeds supply. If demand exceeds supply then prices should rise in the future to subdue that demand.

Indicators of supply/demand that I look at include: auction clearance rates, days on market, discounting, proportion of renters to owner-occupiers, vacancy rates, yield, % stock on market, online search interest, neighbour price balancing, ripple effect potential, long-term growth, unit to house value comparison, market cycle timing, % of sales by auction, % of listings with open inspections, % sales growth, % rent growth.

 

I don't agree with comparing 2 different states over a select timeframe.

But I prefer data to opinion. I vote Continue. Thanks for all the efforts.

 

This thread itself is proof that challenging myths means challenging egos and that's why myths prevail. What you get is one unsubstantiated opinion myth from one 'expert' / narcissist which you rightly challenge, then the emotional tirade from the supporters. You must've done it right @datageek.
In the end, we all agree with you.

 

This is a good example, Dbay, pretty much shunned by most as investment grade despite its water side location but year by year ticked over, until this year that is

 

Popular opinion suggests comparing across states invalidates the point. So, I'll restrict to the same city...

The 'Sydney - Blacktown' Statistical Area level 4 (which includes Mount Druitt) grew by 83% from Jan 2013 to Jan 2018. The median for this area went from $382,509 to $699,308.

The following SA4s are also in Sydney, but in far more affluent areas (investment grade?)...
Sydney - Eastern Suburbs
Sydney - City and Inner South
Sydney - North Sydney and Hornsby
Sydney - Northern Beaches

Their combined median over the same period rose from $1,089,974 to $1,948,425 which is a 78% gain.

I can repeat the analysis for Perth if someone can provide a list of a dozen Perth suburbs they consider to be "investment grade" (hopefully including Cottesloe) and a dozen from the other end of the spectrum, again only in Perth.

 

It's all about perspective. If the investor's goal is to purchase anywhere in Australia, every suburb is comparing apples with apples. And you would want to choose the one with the most value.