Owner Occupier vs Investor ratio - how much does it matter/hinge your suburb choices?

I've been looking at data at number of suburbs I've been considering, and have noticed some substantial discrepancies in the ratios of Owner Occupied vs Rentals, and also owned vs mortgage OO.
Say some at 70% OO, and others below 50%.
Some at 35% completely owned, others at 15% etc etc.

Given it's owner occupier appeal that drives the emotional purchase price/value of a sort after property, are these stats something that many PP look at closely? Has anyone noticed how they affect long term growth/stability?

Would it be logical to assume a suburb with a higher number of owned outright in combination with a higher number of OO mortgage would possibly more stable. Is it then also logical to assume that any existing/prior growth in this sort of suburb has been driven from home owners and not so much investors?

On the flip side suburbs with a higher ratio of investors perhaps have had their growth fueled by investors rather than owners actually wanting to live in the area.

I ask as it seems some (not all) of the more sort after areas have less owner occupiers, but apparent growth potential. If this growth is largely coming from investors, to me this would seem less sustainable than from OO fuel growth. Why, well the more investors, the more rentals, the more rental competition and eventual reduced rental demand, larger vacancy rates and lack of rental growth? So yields become worse and investment interest perhaps reduces along with growth?

I'm just trying to get my head around it. I figure in my budget, allowing for somewhat lower purchase price areas high OO and ownership ratio can only be a good thing into the future if the suburb has some appeal in other aspects. With a oositive of possibly nicer kept area, and has the leeway of allowing future investors into the suburb without negative impact that may take place in investor saturated areas.

What percentages do people find acceptable?

 

I'll throw out an alternative perspective - I look at changes in owner occupied percentages. Areas with climbing OO vs IP percentage shows increasing desirability and will see the more emotional pricing come into play.

Likewise if an area has a current HIGH investor rate (say 60%+) and is trending towards a majority owner occupied rate, this will generally coincide with greater gentrification down to a property level as renovations, general street appeal will increase.

As to what % to buy at - I won't comment as this is subjective and I think comes down to what area, price point, strategy.

 

I've mentioned this in some of the suburb profiles / articles I've published.

I'd not look at OO percentage in unison (though higher is usually better), but together with the vacancy rate to get a meaningful look at a suburb. As Corey said, whether those figures are moving makes a difference, too.

For example if OO percentage is low, on its own that doesn't mean a lot - just that its a popular rental suburb. But if the number is declining and the vacancy rate is increasing then its definitely oversupplied.

 

Not a relevant factor at all for me. Seems tenuous at best that the percentages have a link to whether an area is investment worthy.

For example, CBD areas almost always have a high level of rentals - does that mean its a bad place to invest?

 

Corey, I like your thinking on looking at those trends. Where do you source this info in relation to trends? Snap shots, or 5 yearly (and dated) from the census are easy to get but more recent/granular at all possible?

D.T , good point factoring vacancy rate trends into that too!

thatbum, I see your point, though I would say factoring supply in such rental dominated markets is key here, take Brisbane CBD, I would say yes, a bad place to invest at the moment.

 

dumb question here: how does one get the data?

 

For free information try a free RP Data suburb report, this has a brake down of residents who rent, own outright and purchasing. Some banking apps have similar data available, BOQ and I think the ANZ phone app although I haven't tried this function.

 

Or here:
Community population profiles | Australian demographic information | profile.id

 

I wouldnt pay too much attention to it, for example the suburb I bought in has 43% owner occupiers, which sounds like it would be a house proud suburb, however its actually an ex housing commission, and many of the homes have never been sold before. Id be more interested in a high average income than the OO. Obviously you don't want a street or pocket thats exclusively IPs as thats your competition too

 

I compared data to a Residex (Corelogic/RP data) report on a suburb. The demographic is identical, including OO/Rental ratios to 2011 Census data, so there is no real advantage to using Corelogics data for this purpose over Census data it would appear.

My question was more how one can achieve what Corey sets to find out, that being how to get the data on changing trends relating to OO vs Rental ratios etc.

Static data (Ie old Census) from over 5 years ago doesn't seem that valid to me.

Otie, Interesting comment on 43% OO. I would have thought his was a low percentage and as such with the majority of the population in that suburb being renters then it would be a less 'house proud' suburb? Good point on the incomes in the suburb though and trying to avoid a pocket of only IP's in a certain street. I'm pretty sure I can find all that data out for individual properties, in QLD at least (friend is a PM).

 

Could also be the case if it's inner city that land values are high and zoned Medium density. Limited number of houses due to new developments with a high number of renters in large unit blocks.
This would skew the data lowering the number of OOers but houses in the suburb could still be tightly held and in demand by OO.

 

Doesn't concern me that much. Eg inner city (think Ultimo, Carlton) would have higher investor base. But I'd still buy there any day of the week.

 

Oh it may be low-I just did a quick search on some high end suburbs such as Balwyn, South Yarra etc starts and they were around 48% so that's why I assumed it was a hoggish OO rate.
Be mindful some affordable house and land suburbs also could have high OO rates due to the affordability means often cheaper to buy than rent- skews it all again. I wouldn't concentrate so much on it instead have a look around the area etc

 

Good points all, it's not all that black and white with stats is it.

 

Hey Dave
Where can you find the OO VS INVESTMENT ratio free? And can you see a graph or similar with the suburbs changes of OO vs invest ratio

 

Try investar

 

Thanks DT great website