Are you looking to invest in high growth property, but are concerned about the downside risks at the same time?
In my years of experience as an investor and buyer’s agent, one of the biggest killers that I’ve seen when it comes to investing in property is failing to identify the supply in the area.
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This doesn’t just go for what is in place as of today, but what could potentially be built in the coming years.
A lot of people view the construction of new property as a positive thing because it’s improving what might have once been a dreary and run down suburb.
However if construction goes unchecked, what can happen is that supply starts to exceed demand, ultimately effecting prices and rental.
So how do you know if there is a high level of supply?
The skyline is generally a good place to start.
Units that are capped at around three stories in a suburb where houses are plentiful is a good sign.
Compare that to typical scenes of inner city living – miles and miles of units, with more being built as we speak.
The problem with this is not when times are good and demand is plentiful, but when the market turns, demand falls away and units stop selling.
This is when more generic-style properties that have similar layouts, similar outlooks, with nothing unique to point them out from the rest of the pack often start competing on price.
And that’s when we see rentals fall, and the assets themselves fall in value or at least stagnate.
So if you’re looking to really protect your property portfolio from the risks of the market, you must be aware of the amount of supply in the area – and that goes for units and houses.
Does the demand for the area outstrip the existing supply? Or is there so much supply coming in that it could never outweigh the demand, because that will mean that prices will stagnate and could even fall over the long-term.