Do your research, and you will still find booming suburbs

This week we’ve been inundated by reports in the media about an impending market crash. I watched with interest as one current affairs program sensationalised and dramatised a story by editing quick grabs of what a few different commentators were talking about.

If you missed the host’s introduction that “some markets are at risk of collapse”, then you’d be thinking that we were all doomed and there was an impending national market crash fast approaching. Little cuts to the US property crisis didn’t help. Later in the story we do find out they were talking about what was going on in two Queensland suburbs where two people had purchased units off the plan in a massive high-rise complex in a very densely built-up area (a risky investment strategy). Further into the story up popped a list of other “difficult” suburbs around Australia. The interviews with several commentators were edited so much that we can assume that a lot of the really interesting detail they spoke about wasn’t included.

The problem with these reports is that they are designed to keep you glued to the TV and up the ratings and not necessarily to educate you on the topic. So if you were thinking about developing property and watched that program, you would certainly be having second thoughts.

It’s up to us to dig down to the detail, sift through all the noise and get to the facts. We need to become a specialist in the areas we want to invest in.

My due diligence includes tracking a certain postcode’s medium quarterly sales going right back to 1997. I buy this data from Residex, and to me it’s the best investment I can make as I can see:

-          How fast the market grew during its boom years;

-          The actual number of property sales each quarter;

-          The median price has stabilised and enjoys steady incremental growth over
the past six to years even though the number of sales seems to fluctuate;

-          the impact the first home buyers had when they were active;

-          where this suburb is in the property life cycle; and

-          I know the average 10-year growth rate is over 12%, which works for me.

This long-term statistic can help you compare different suburbs. I overlay this historical data with the current research I collect on these towns. I read regional strategic council reports, I look for government and council spending on infrastructure and what is happening in the community.

A $1.7 billion freeway link is under construction and will have an interchange in one of the towns in this postcode. We are seeing two major supermarkets opening in one of the towns, and this is boosting employment. Another town under this postcode is enjoying incremental spend from the phenomenal concerts in the vineyards industry which is bring massive artists such as Elton John to the area and boosting the hospitality and tourism sectors. I know that the vacancy rate is under 1% and the type of dwellings that are in demand. Armed with all this information, I feel very confident that developing property in this post code is going to continue to pay off.

As a developer you need to be extremely confident about the location of your development because there are so many other factors that can affect your development, the more you can sure up, the better chance you’ll have of a successful result.

So is now the right time to be developing property? It will depend on the areas you are looking at. For me, it’s a resounding yes, as I’ve done the research and know that my client’s projects in the Hunter Region of NSW are going to do well for them.

Jo Chivers is director of Property Bloom, which manages property development.