signs that tell the story

hi everyone
one part which i really really struggle with this whole investment game is knowing what signs to look out for that tell a story (stories are interpreted differently mind you) of the property market in whatever location.

where could beginners like myself go to learn something like this?

anyone willing to share an example of their list of tell tale signs they keenly watch? either for a rising market or falling market or even a developing hot spot for example?

secret stuff i know

cheers

 

This is my list:

1. Government policy changes.
2. Interest rates.
3. Economy.
4. Unemployment rates.
5. Exchange rate.
6. Number of people going to property inspections.
7. Auction clearance rate.
8. Average number of days it takes to sell the properties.

 

Public sentiment is also very important. There is no 1 sign. If you read the magazines, follow the forum and look at the indicators of supply and demand eg SOM, discount rate, ACR etc you can gain a good idea of where states are in cycles.

 

A developing hotspot is signs of new and/or improving/expanding infrastructure.

Widening/improving roads, new schools, new Bunnings/KFC/Maccas etc, new hospital, new estates where vacant land was (see new infrastructure).

 

How to identify areas poised for growth
1. Look for areas experiencing gentrification

These areas may have had a poor reputation in the past, but are now seeing homeowners moving in and changing the landscape of the suburb.

• Look at the affordable areas in a region you’re interested in;
• Check out how the property prices have moved in the past two to three years;
• If prices have grown steadily, look at the demographics. An increasing number of young residents with good income is a solid indication that the suburb is about to gentrify;
• Look for signs of new houses or renovated homes springing up in the area;
• Look for new cafes or retailers opening in the suburb.

Read more: Signs a suburb is becoming hipster




2. Look for the ripple effect

If you can’t afford to buy into a high growth area (you might have just missed the mark this time around), you might still be able to buy into the area by checking the surrounding suburbs. This requires timing, so you need to know which phase of the cycle the local property market is in to maximise your chances of riding the wave of growth.

Top tips for finding areas before the ripple of growth hits

• Measure property values by comparing the median prices of adjoining suburbs;
• If there is more than a 5% variation, chances are the suburb next door will be playing catch-up;
• Closely monitor median price trends on a quarterly basis. Once you are certain the cycle has kicked off, look for properties within your budget that are as close to the growth as possible. Subscribe to alerts from realestate.com.au for properties coming on to the market;
• A good rule of thumb when buying in the capital-city suburban markets is to buy within 10 km of the CBD; growth is virtually assured to ripple this far out during a cycle.

Read more: Common investor mistakes & how to avoid them

3. Examine supply & demand

The supple versus demand ratio of properties in an area is a key driver of price growth. If there is no more capacity to build in the suburb but demand keeps on growing, prices will likely climb.

Top tips for finding high-demand, low-supply areas

• Look for areas where the rental yield is rising. This indicates that an area is popular among renters. When renters become homeowners, they also tend to buy in the same area they’re renting in;
• Look at the demographics of people moving into the area. Without meaning to sound ageist, suburbs where the median age is around 35 or so tend to gentrify faster as these demographics tend to have better income and are therefore able to afford to buy or rent more expensive properties;
• Look for areas with rising population. Population in itself is not enough to push prices up, but when combined with other indicators such as rising income and low supply, this is a good indication that property prices will grow in the area.

4. Look for large infrastructure projects underway

This is a good indicator that the area is likely to see a spike in housing demand as workers flock in for jobs. Projects that are already commenced are preferable, as project promises can fall through as governments rotate and budget priorities shift.
Nila Sweeny is the author of this article.

 

Building construction approvals is another one.

 

I like to think of it like shares. There are technical indicators and fundamental indicators. In business the fundamentals are things like value, profit, income. Technical indicators are things like price and volume. Real estate has its own versions of these. Of course it all can be boiled down to supply and demand but I find it helpful to break this up. In property fundamentals can be seen as things like 3 and 4 on your list. Technical indicators would be seen in the 6 and 7 type measures.

This may or may not be helpful. Just keep reading, it will get clearer.

 

I like to look at the behaviour of the agents. I'm in Sydney, and all the open homes I had been to throughout 2014 were packed, so agents wouldn't give me the time of day. Essentially they didn't need me. Same story for the first half of this year - they'd take my details but never follow up. If I didn't feel chased, I knew they had too much interest in the property and I'd never buy it for a good price (we were looking for a PPOR).
Now? All those agents have dug up my details and are asking me whether I've found what I was looking for. They're telling me about all these great houses they have that suit the criteria I gave them a year ago. Now they need me because their open homes have much less traffic, fewer contracts are going out. This tells me that the market has cooled off.
Forget the media - keep your ear on the ground.
The other people I like to talk to are the brokers - how much lending is going on? If nobody is borrowing then nobody is buying.

 

Yeah i agree @BuyersAgent . The indicators are really trying to show/a measure of where something is in relation to its S/D balance, as you have indicated. That's what ultimately causes prices to fall/rise.

 

They're at the front of the food chain. So are solicitors/conveyancers.

 

@skuzy residex also have some good reports (fee based of course).


http://www.residex.com.au/documents/State_Market_Report_Online_Sample_v2.pdf