What Makes a Great Suburb to Invest In?
There are a number of important criteria which determine how good a suburb is to invest in. This week I've spoken in detail about one of my favourites:
Owner-Occupier to Renter Ratio
This statistic shows the number of people who own property in a suburb to live in compared to the number of people who own property as an investment. One of the best signs of the health of a suburb is the number of people who are prepared to buy property and live in it, so this statistic is vital in assessing a suburb’s potential. 67% of Australian residential property is owned by owner-occupiers, and to invest in a suburb we want the ratio to match or surpass this. Here’s why:
- Owner-occupiers are better property owners than investors. Owner-occupiers take greater care of their properties, are more likely to add value, and are more involved in the community. This makes for better suburbs to live in.
- Owner-occupiers are steadier and more reliable property owners. They buy to live in the property generally for the long-term, unlike investors, who are frequently fickle, moving in and out of suburbs based on market trends.
- A high owner-occupier ratio is a good sign that an area is an attractive area to live. Buying is a much bigger commitment to renting, and owner-occupiers will take much greater care in where they choose to fork out hundreds of thousands of dollars.
- While it may seem counter-intuitive, owner-occupiers will generally make better decisions around purchasing than investors. Why? Think about it. If you’re buying a home to live in, would you buy sight unseen? Would you buy the first property shown to you buy a marketing company? Would you buy a high-rise apartment? Would you just swallow the marketing hype around a suburb? Or would you check it out first then make your decision? Some investors are strategic, but many are not. Most people conduct far more research and due-diligence on a property they will live in than one they will invest in. That’s a fact.
- Finally, owner-occupiers will pay more to live in a nice area, while investors are always chasing bargains. High levels of owner-occupier activity in a market will create solid and sustainable price growth, based on the fundamental attraction of an area to live in.
A high owner-occupier ratio is a great sign of the current and future health of a suburb. It means people are buying in an area to live, that properties are more likely to be taken care of, communities will be stronger and amenity will be higher. It also means a suburb will have more stable and predictable growth, as it doesn’t have the volatility of investors piling in and out of the suburb.
The owner-occupier ratio can also be a useful tool for assessing individual townhouse and apartment complexes. A complex with a high ratio of owner-occupiers not only signifies it is a more attractive place to live, but will likely be maintained to a higher standard and have a more efficient body corporate. Be particularly wary of complexes with a large number of holiday rentals. This creates a real sense of transience in the complex and is not attractive to potential buyers.
Aquila Property Investment uses a range of strict criteria to determine a suburb’s suitability for investment. If you’d like to find out more, book a free 15 minute consultation with Andrew by email at andrew@aquilaproperty.com.au