Property Investors Need Two-pronged Research
In an article for the website Your Investment Property, Miriam Bell says how investors should conduct a two-pronged research before going ahead with a property purchase. Statistics and fundamental drivers are equally important and work well cumulatively, if thorough diligence is applied by the property investors.
Two drivers of property research
Statistics, argues Bell, will give you a history of capital growth, the rental yields and the vacancy rates of your prospecting area. It will also give you a glimpse (sometimes more than a glimpse) of the kind of comparable sales figure for the area.
Similarly, fundamental drivers like town planning initiatives, development works or the introduction of a quality service hub are all important and facilitate value growth.
Relying on a sole fundamental driver can be a flawed strategy
Bell points out that dismissing statistics and relying solely on one fundamental driver (like a newly opened hospital or a rail link) can be a proposition laced with fallacy. Property investors may pay through their noses for the mistake.
You can read the original article here.
What the mining boom taught us?
The mining boom was perhaps our greatest teacher in my opinion. We relied all too heavily on it and areas which recorded the mining boom got a shot in the arm in terms of the property prices. The very same areas receded into oblivion once the bust occurred. This showed us, inarguably, that in the absence of multiple industries or diverse factors of growth, any local economy suffers.
The brute power of statistics
Statistics cannot be undermined. I have always looked keenly at the comparable sales figure. It cannot be a false indicator, given that it gives the comparative sales price of recently sold off properties- both within a short radius from your property and of equivalent area to your property.
In the same vein, history of capital growth is also important to comprehend, irrespective of whether an investor is seeking a counter-cyclic investment or willing to go with the tide.
Which between statistics and fundamental drivers do you accord more weight to?