Research is a technique any person must need to hone especially regarding to action planning that needs the knowledge of certain facts. There is a lot of effort done to properly do research, but it is for the sake of progress and success in your property investment venture. It would be unwise to blindly initiate your investment and let the consequences be a learning point. Having a property investment means that you will eventually rent out your property to tenants. It is important to research on the suburb, state or territory demographics of your property because your potential tenants are within or related to that population pool.
Knowing the preference of potential tenants is useful in filtering and choosing properties that can capitalize on the rental returns and decreased vacancy rates. The broad characteristics given by demographic data can help understand the population (the community and possible neighbours), requirements (needs and priorities of the people), income (employment and levels of income), and property demand. These demographic elements will determine your strategy of renting out your property and how to control the property for a prosperous long-term return of investment.
What are the Key Demographics to Research for Locating the Best Investment Property?
When you have a suburb in mind, but still looking for a specific property to invest on, it is best to first get to know the people who already live in that area or the type of people who want to live in it. It is good to find suburbs with high population growth and determine what makes tenants and homeowners stay within that suburb area. Figure out if that suburb has new job opportunities or diversified employment industries because these genuinely attract renters with usually high net income.
But what demographic characteristics do you need to search for in order to select the best property investment location?
- Population Growth Rate
Population growth involves the increase of people not only through births, but also through relocation and migration. The rising population growth rate can determine the property demand of the demographic area. Higher demand for properties can be a good thing because property prices are increased and rental rates can be raised higher. Although high and healthy population growth is essential and what is looked for, it is required to determine the population density per square kilometres.
One approach to judging population growth rates is to compare between nearby suburbs and similar suburbs of different states and territories. SuburbsFinder can help with sending suburb demographic reports.
The reports are tools to discern high population growth areas that have compelling opportunities such as easy tenancy and rental returns. Other population related information needed to consider in picking a property investment location are the type of people (students, fresh graduates, young families, young and seasoned professionals, old couples) that desire to rent in high-growth areas and the kind of properties that suits their lifestyle (units, houses, townhouses).
- Job Opportunities
For ease of transport and commuting, tenants choose to live in properties that are close proximity to their work. When looking for property locations, it is best to select properties that are either close to existing office centres, Central Business Districts or suitable future employment hubs. However, if the suburb is rather far from business related vicinities, a good alternative is to find road networks or transportation hubs that are easily accessible which lead towards business districts.
Although the close distance of new job opportunities is a great advantage, consider that the property’s location is a still further away from the commercial area. The closer the property is to the commercial zones of the suburb, the lower the privacy for the residential property. Noise, commercial light, and traffic are common problems that weaken the privacy one would like from a home.
Check out “How to make use of Supply and Demand Indicators when it comes to investing property?“
There shall be potential for demand growth when there are developments of new employment hubs. But remember that all tenants have varying tolerance levels especially when it comes to the disadvantages of living near commercial or industrial zones. Also, note that the closest business hub must not only rely on a single primary industry/company/employer. It is better if the closest job opportunities do not come from one company only since any business problem or downfall will bring vulnerability to the tenant-workers. If the work gets cut off, fails, or relocates, then it will bear heavy consequences, such as aggravating the risk of rental losses and long vacancy rates.
- Income Changes
The income profiles of the suburb’s residents are important demographic information to be used in choosing a location. High income growth rates in the area signifies that the residents have enough money to spend for their lifestyle and their homes. For suburbs, it’s natural that as the years pass by and as the surrounding area develops, socio-economic factors that reinforce the suburbs have evolved and positively brought up the living conditions. As chances for economic stability and expanding residential territory increases, the inclination of people moving into highly praised and trendy communities grows larger.
Discovering the household income and comparing them between suburbs will help give a gist of which of them have a higher income growth rate. An increase of growth rate can indicate that a suburb is flourishing and demonstrates its value to entice new property investments.
When you’re doing your own research, you’ll find it helpful to use SuburbsFinder, which has useful data on household income by Suburb that can be filtered based on your requirement.
How to Use Demographics to Search for Property Types Worth Investing In?
The point of researching for information is to use it to come up with decisions. In this case, the demographic data collected shall be used to determine what type of property attracts current and future tenants. The property must be well equipped with selling points that meet the needs and requirements of potential tenants. The property must also reach the price point that can measure up to what the tenants with a specific income range can afford. Successfully investing on a property with components which are widely sought-after balances the tenants’ demand for the property which safeguards continuous rental returns with the probability of being able to charge extra for its property value.
Below are three expositions and examples of how to use sample suburb demographics in formulating decisions for your property investment. Take note that all the demographic data you’ve researched may not be needed for certain situations and there may be other extra information you need outside of your scope of research.
Example A: Suburb location with high density of young families
Let’s say that this suburb has a medium to high income rate with high population growth rate because majority are young and growing families. Young families are starting to settle for themselves; thus they need a home where they can be comfortable in. For this type of family, the best property is a single-detached (also known as single-family) house with around two or more bedrooms in case their family would continue to grow. Additional value if the property has its own garage, front garden and backyard.
Key attractive points related to the property would be:
- Close proximity to schools especially for the children
- Proximity to services and small commercial facilities like grocery and department stores
- Easy access to amenities like parks and community centres
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Key features related within the property would be:
- Ample living space that can accommodate more than the members of the family in case of visitors
- Spare rooms that can be transformed to a bedroom or an office or a study room or an extra storage area
- Lots of leg room especially for children or pets that can stay active without constrictions to space
Example B: Suburb location with high density students or fresh graduates or young couples
The next suburb’s population are predominantly students, fresh graduates or young couples that have low to medium income growth rate, but the location has a lot of job opportunities administered around the area. This type of people would look for short-term residency that are low maintenance since they may be out of the residence for most parts of the day. For this type of people, the appropriate living conditions are apartment units or townhouses which are near business and institutional districts.
Key attractive points related to the property would be:
- Close proximity to educational institutions especially for the students
- Close proximity to employment hubs and office centres especially for the fresh graduates and similar employees
- Easy access to transportation hubs for people’s ease of travel.
Key features related within the property would be:
- Spare room that can be transformed to a study or an office
- Garage or a car space for parking of tenant vehicle
- For students to lighten the rent, the property must be capable of accommodating roommates or flatmates or housemates
Example C: Suburb location with high density of professionals
This last suburb has a high-income growth rate and majority of its population are well-established professionals of their field. This type of people is sometimes the trickiest to accommodate because they may tend to require more than what your property can offer. However, they are also the type of people that would happily occupy the property when they are given the freedom to transform the space into what they need it to be. The property they would choose are bungalow house or single-family house. Additional value if the property has its own garage, front garden and backyard.
Key attractive points related to the property would be:
- Close proximity to business district for professionals that work there
- Proximity to commercial areas like grocery and department stores
- Easy access to community amenities
Key features related within the property would be:
- Spare rooms that can be transformed as an office, a studio, a library or a multi-purpose room
- Garages with more than 1 parking slot to accommodate more vehicles
- Developed backyard for lounging, eating, or working outdoors
What are the effects to the real estate market when demographics change significantly?
Nationwide demographic data are being updated on certain intervals. Some data are not reliable because of accuracy to the current time, however demographics especially those related to population shall always be increasing. As mentioned earlier, demographics can give hints to what the real estate market should focus on.
The possible demographic elements which undergo significant change as well as be able to affect the real estate market are
- Population Span: Ageing Population
Ageing population is also known as demographic ageing. This happens when the proportion of older people in the population persistently increases. Although it may be because of medical technology advances, thus the life expectancy of people is longer. The population may be ageing because of lowered birth rates. Having an ageing population may impact especially the labour force markets and all the industries tied to it.
- Population Size: Shrinking Family Size
Nowadays, fewer people are getting married, or people are getting married later in life or couples are having fewer children than the earlier generations. There are a lot of factors for smaller family sizes, but for now people don’t tend to buy newer and bigger homes if there won’t be any new additions in life like a child or a pet. Some people have also decided to live tiny which means that instead of having bigger homes, they choose smaller ones.
Check out “Capital Growth Trends Every Property Buyer Needs to Know“
Demographics affect the real estate market one way or another, whether it be the population size that determines the property demand or the lifestyle of specific sections of the population that determines the desired type of property. But there are ideas and concepts which demographics can provide for new property developments. For example, communities and properties are allowing pets to live with the tenants. Another example is that newly constructed properties may have fewer rooms and also lesser land which can be ideal for smaller households.
How can the census be connected to real estate? What real estate related information can be seen from the Census?
The census is a compilation of information based on individual households. The data and figures relate to real estate by:
- Population per area – nationwide population, city population, local government area population, and suburb population
- Types of housing used – stand-alone house, townhouse, or apartment unit.
- Size of houses – number of bedrooms, number of storeys, or number of people living in the property
- Type of tenure – rental property, owned property, or mortgaged property
- Movement/Relocation – moving between different local government areas, moving between interstates, or arriving and moving to Australia
- Household size and resident’s stage of life – newborn babies, young toddlers, school-aged children, adult children, married couple or single parent, and grandparents
- Income – income range, portion of income that goes to rent or mortgage, portion of income used in other aspects
This data is available to the public for commercial activity, scientific discovery, and possibly entrepreneurship and innovation. All data can be listed by suburb which provide significant figures for the real estate market.
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What are the impacts of the census on decision making for property investment?
The census is an instrument utilized by urban and regional planners of Australia. Strategies are formed based on the figures in the census especially for local housing, design and planning strategies. The state and local governments shall assess the census figures then lay out possible schemes that can counter any issues noticed from the census. Schemes are introduced that can possibly encourage diverse housing, increase sustainability and robustness of suburb properties for the long-term.
