We like to keep tabs on every statistic we can find concerning investment property in Perth. Consequently, we end up reading a lot of reports, surveys and studies from a lot of different sources. We combine this with our own research and our experience in the property market to produce a very good market analysis.
Sometimes, though, we like to share the results of individual studies that we think are relevant to property investment in general and to the Perth market in particular. Recently, we came upon a piece by John Edwards, founder of a residential research company called Residex.
Mr Edwards and Residex are unique because they have their own proprietary formula for choosing a suburb for investing. He also knows that what’s right for one investor might not be right for another one. For example, he recommends that those closer to retirement age find a property that is positively geared, meaning it provides cash flow.
For those who are younger, he recommends a property that is negatively geared or losing money, providing tax benefits and future capital growth. Mr Edwards believes that if one is looking for capital growth, they should view the history of the area over the previous twenty years. This is because he believes that any area usually reverts to its historical rate of growth due to location being such an important factor in growth.
However, Mr Edwards now believes that capital growth should only be one factor out of many because it is no longer dependable in the current era. Here are the three factors that Mr Edwards believes you should take into consideration when choosing a location for property investing.
Avoid Oversupplied Areas
Areas in close proximity to a lot of large apartment buildings tend to stagnate. Check vacancy rates in large apartment buildings by seeing how many apartments are on the market for rent.
Seek Infrastructure and Convenience
This is one of our favourite market factors: proximity to schools, transport, employment, shopping, medical and entertainment areas. Find a place where people want to live and your investment property will never be empty.
Avoid Seasonal Tourist Areas
A home on the ocean makes a nice residence, but they can be difficult to fill during the winter.
The Winners Are…
According to Mr Edwards and Residex, the best suburbs for houses are Pinjarra and Medina.
We see Pinjarra as a reach, both literally and figuratively, but we will keep an open mind. It is in the Peel Region, 86 km from Perth. We have written here about the outer ring of suburbs becoming the “hot markets” due to the expense of property in the CBD and inner to medium ring suburbs.
Pinjarra may be a bit too far away, but we do like the fact that property prices are still low there. In twelve months to June 2014, the median sale price for a house was $332,000. Compare this to a median price of $565,000 for Perth.
Medina makes a lot more sense to us, located within the City of Kwinana. It is only 38 km south of the Perth CBD and is closer to Perth than Baldivis, which was debatably the hottest suburb of 2013. The median price for a house from June 2013 to June 2014 was $289,000.
What It Means to You
We are on record as recommending that you take a serious look at the outer ring for investment opportunities. As the population continues to grow, people will need places to live. We think Medina and Pinjarra are worth serious consideration, especially Medina.
We recommend doing your own research and talking to us about what we think. We can’t really give definitive advice on a blog because everyone’s goals and situations are different. We keep up on what is going on in every market within Perth.
If you are interested in finding investment properties, we can offer real estate agent and property management services. We can also set you up with our proprietary “Property Investment Success Plan.”
Call 1300 472 427 to learn more.