Factors that contribute to the decision making for investors

Factors that contribute to the decision making for investors

It is important to consider a range of factors when choosing an area where you would like to invest in property. You have to ensure that you don’t get caught up in just one statistic or factor, as that factor alone could be painting a different picture than the one you want to eventuate!

There are many growth drivers, and they all work as only a small part of an overall puzzle, somewhat like a jigsaw puzzle. With too many pieces missing, the puzzle just does not work.  The more pieces you can fit into that puzzle, the better the picture becomes.

Where property is concerned, the pieces are the growth drivers, but taken alone a single piece is not enough, or may not provide the right picture. Take the ‘housing starts’. The idea behind ensuring that there is not too much development going on is to ensure that the area is not oversupplied with property.  Since the only thing which ultimately drives growth is demand, an oversupply of property will dilute that demand and lead to a sustained period of low, or no growth.

If you are looking in smaller areas to get started you may find an area with 50,000 population and low housing starts, but those low housing starts figures could be because no one is moving there, or there is little employment or anything else happening in the area.  And so the low housing start factor must be combined with a population growing faster than inflation, diversified employment, no new land for future development and a number of other factors for it to be a pointer to future property price growth.

There is no figure or calculation, but if a population is growing by, say, 1 percent per annum and housing starts are only growing by 0.5% per annum, and other drivers also exist, then it makes sense that a future increased demand for housing may ensue.

Always make sure that you examine all of the factors – it is the trend of those factors and their relationship to each other which becomes important, rather than the number itself.

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