The capital growth property investing strategy is still very popular amongst property investors, and although the first few years of holding an investment property can be challenging, remember that capital growth can grow your equity if you invest wisely after carrying out thorough research.
Key indicators of capital growth
| Indicators | How it can help you |
| Last 20 years capital growth trends and median property prices, for houses and units | Past performance of a suburb can help predict future capital growth |
| Average property days on market to sell time / auction clearance rates | Tracking this helps ascertain the current supply and demand for property in for a locality. Where demand for property consistently, over the long term, outstrips the available supply, prices will tend to rise. |
| The ripple effect | When the market starts a new phase of capital growth, prices often start to increase in the suburbs closest to the capital city centre first. The ripple effect then sees the wave of new growth ripple outwards over time to suburbs further from the city centre and to regional areas. |
| Future developments of infrastructure or amenities |
Planned improvements to an area, such as a major highway, schools, hospitals, transport and shopping centres, can lead to future capital growth due to: Increased desirability of the location followed by population growth, increased employment and further investment. |
| Increases in income levels | As the average income rises in a location, so can the capacity of the its residents to spend more of this disposable income on: > Local amenities, retail etc with flow-on multiplier effects which can increase the desirability of a suburb. > Renovations and improvements on their principal place of residence or investment properties – improving the quality of properties in a suburb. |
| Population growth | Inward migration to a suburb can influence capital growth as when people arrive in a locality, they need somewhere to live straight away. Targeting areas with strong population growth and limited capacity for new housing, which can affect the levels of demand for property, can affect capital growth. |
| Rising weekly rental prices | This reflects high rental demand and the attractiveness of a suburb. |
| Low supply of vacant land for development |
Less land available means fewer new properties to compete with existing properties. Where supply is constant and demand rises, prices tend to rise too. |
| Comparing median prices in neighbouring suburbs |
By identifying trends in these differentials, investors can identify gaps where suburbs can potentially catch up in capital growth. |
No-one single factor can be seen as an indicator of capital growth. Thorough research of some or all of these factors can help you best predict whether a property you target will increase in capital growth over time.
Real Estate Investar members use our Investar Search, My Valuer and My Research tools, which are included in our Pro Membership, to perform extensive due diligence at a suburb and property level including:
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