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Everyone is in different circumstances and at unique points in their investing career. Everyone has their preferred investment strategy. Some investors want positive cash flow, some are after renovation opportunities, some want cheap, some want bargains and some want to buy and hold for the long run. So how can an investor look at the data available in a way that assists them with their specific needs?
The demand to supply ratio (or DSR) BoomScore is an excellent indicator investors can use to gauge a market’s potential for capital growth. Comparing the entire Australian market of DSR BoomScores is a great way to shortlist potential hot spots. But the data upon which the DSR BoomScore is based can also be used to locate markets for investors looking for something in particular.
The DSR BoomScore is a measure of the imbalance between demand and supply for a property market in Australia. A high DSR BoomScore represents a greater statistical likelihood of immediate capital growth compared to a low DSR BoomScore. For a detailed explanation, visit www.DSRscore.com.au. You can also view the DSR BoomScore and related stats for 15,000 Australian suburbs by using the free property research web app, Boomtown, at boomapp.com.au. This tool is powered by the eight stats which make up the DSR BoomScore.
The data in the following tables were all sourced from our data for September 2011. A few restrictions were applied:
Firstly, only markets with a reasonable degree of statistical reliability (SR) were considered. In this case, only markets with an SR of 62.5% or higher were allowed. For those who have downloaded the DSR data, this equates to an SR score of 5 or higher out of 8.
Secondly, only markets with a decent level of stock on market (SOM) were considered. If the SOM is too low, you can’t find anything to buy. So all markets shown had at least 7 properties for sale at the time of writing.
I’ve chosen markets based firstly on DSR BoomScore and secondly on another statistic like yield or typical value.
Some investors don’t want to buy in areas they have no prior knowledge of, so I’ve included the top markets in each state rather than the top markets in Australia. This is in case one state dominated a particular list. Some of these locations may not have a very high DSR BoomScore though.
These kinds of lists should only be used as a starting point of further due diligence. As with all statistics, be sure to apply some sanity check to the data by performing your own fundamental research. Check that the data makes sense and is still current.
I’ve only summarised the relevance of each statistic. This is because previous issues of Your Investment Property Magazine have delved into the details already.
HIGH YIELD MARKETS
Capital growth is what makes investors truly wealthy, but you can’t ignore cash flow. For those investors with tight loan serviceability, table 1 may be of interest to you. It lists the markets with both excellent potential for capital growth and great cash flow.
CHEAPIES WITH HIGH POTENTIAL
If you’re a little short on equity or serviceability, you may need to go cheap. Table 2 lists the top markets for immediate capital growth by DSR BoomScore but with affordable prices.
MARKETS FOR RENOVATION FLIPS
If you’re planning to buy, renovate and then sell, you’ll need to know that the market you’re investing in will support a quick sale. Table 3 is a list of markets with high DSR BoomScore as well as low days on market (DOM).
SUBURBS TO GET BIG DISCOUNTS
Table 4 shows those markets with the largest discounts offered to buyers from the original asking price. This is where bargain hunters can negotiate a great deal. But be sure you know what you’re doing in these markets; don’t expect much capital growth in the short term.
If you’re worried about a newly purchased investment property experiencing an extended vacancy period, you’ll be interested in the data in table 5 which shows high DSR BoomScore markets with low vacancy rates. The list compiled also considered the proportion of renters in the market. A low proportion is preferable so there is less competition amongst landlords for tenants.
Although the DSR BoomScore bundles important property statistics into a convenient single score, the data on which it is based can also be sorted to target markets for investors with special requirements. With 15,000+ localities around Australia it makes short-listing your next market so much easier and gets your due diligence off to a robust start.
Your Investment Property Magazine