How do you spot a suburb before it shoots up?
If you’re looking at homes for sale with the intent to benefit from capital gains, you should look for an area that is showing signs of imminent and sharp growth. In the real estate industry, these suburbs are called ‘hot spots’, and they are highly sought after.
The median price in Auckland rose a jaw-dropping 25.4 per cent
Essentially, purchasing a property for sale in one of these areas will allow you affordable access to the property market, before providing you with the benefits of the sudden growth. What you do with your windfall is completely up to you – you could hold onto the property to experience further growth, use the equity to add to your portfolio or sell the home to reap the profits and retire comfortably.
However, it’s not as easy as it sounds. Identifying where to buy, when to buy and what to buy takes proper research, planning and often investment advice from professionals that you can trust.
The last 12 months have in fact been highly profitable for Auckland homeowners and investors. Figures from the Real Estate Institute of New Zealand show that in just the year to September 2015, the median price in Auckland rose a jaw-dropping 25.4 per cent – equitable to $156,000.
Do you want a slice of this rather profitable pie? Here are a few tips on how to find an area that is soon to shoot up:
Purchase in areas that have access to a major city centre
Love them or hate them, the cities offer the most opportunities for employment, and as such, the majority of people live in the proximity of one according to Statistics New Zealand.
Rental properties that are reasonably close to a major city centre will often provide greater rental yields and less chances of a vacant home, simply by catering to the masses.
Westpac New Zealand suggests also considering property in a region that is a little further out, but has improved transport options on the horizon to make the commute easier, such as new roads or more efficient public transport.
Scout out suburbs that are significantly cheaper than surrounding areas
The Commission for Financial Capability recommends searching for these price anomalies, as they can indicate a growth in the very near future.
For example, if one suburb’s prices have surged to the point where they have become unattainable for the general population, it’s likely that they will look at the neighbouring areas. The increase in demand will drive prices up, and as they say, the rest is history.
Speaking with a real estate agent can also help, as they will often be able to offer you insights on rental properties based on experience and knowledge of the local market.