Tuesday, November 5, 2013

Property Investment Is Real Estate!

What is the point of spending more money than you would on any other product in your entire life, if you haven't researched and understood the underlying fundamentals of the place you will be living or investing in?

The purpose of this article is to provide some clarity on the subject of property investment in relation to the Australian residential real estate market.

In Australia there are more than 9million private dwellings to house a population of almost 23million according to the latest Australian Bureau of Statistics Census in 2011. This means, there is approximately 2.6 people living per household.

If you were buying a property in this scenario would it be a 1 bedroom or a 3 bedroom?

Property investment research is a practical and logical field in which a myriad of interconnected factors are at work to create changes in property markets.

What would happen next if the population had a median weekly household income $1,234?

Shopping = $250

Travel = $100

Entertainment = $100

Miscellaneous = $300

This leaves roughly $450 a week for the property, which is the median monthly mortgage repayments as of 2011 in Australia.

How much can this actually enable the average Australian to buy?

Being generous and based on borrowing calculators, estimates are less than $200,000, which means a hefty deposit and plenty of saving. This shows you need to know and understand the market you are entering, or else you may be building or buying a product that no one can actually afford or want. This severely dampens future investment prospects as your 'exit strategy' is limited.

Understanding means:

  • The economics of the market such as what do people do for income?

  • Are they secure and stable industries?

  • Is there a lot of wealth in the area?

  • Will the population retire and want to move elsewhere?

  • How many people live per household?

  • Links to public transport such as trains, buses and airport?

  • Local amenities such as educational, entertainment and leisure facilities?

  • Government spending to increase amenity and efficiencies?

  • Surplus of available properties on the market for sale or rent?

Without the above examples and many more, how can you be sure the property investment will be stable and actually have demand long into the future?

The final goal is to paint a full picture of the macroeconomics, microeconomics and 'intangibles' within the market to truly understand the way the market fundamentals operate.

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