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How to choose the best property investment in 2015

Wednesday, 7th Jan 2015

The Australian property market is set to deliver mixed results in 2015, so what should investors bear in mind when making a purchase in the year ahead?

It is pertinent for investors to consider the influential factors that can mean the difference between substantial capital growth in some areas and stagnate prices in others.

There are four basic elements that can help deliver robust capital growth in any property market.

These include the necessity for a strong local economy, high population growth, high average wages and a limited supply of housing stock.

Fortunately, many of Australia’s capital cities have some or all of these attributes.

A strong local economy, and particularly solid local industries, are necessary for obvious reasons – to provide a robust employment market which will lead to an increase in living standards.

For example, Queensland and Western Australia have benefitted greatly over the past decade from huge investment in the mining and, more recently, the natural gas industries.

Although the natural resources sector has cooled in recent months, this was always expected, and it remains that these industries will continue to deliver large revenue streams and employment opportunities for decades to come.

Generally with a strong local economy comes high population growth and high average wages, which can further bolster capital growth in property markets.

While Australia’s western and northern states boast strong population growth with migration from residents in the country’s eastern and southern states, overall Australia enjoys high population growth from overseas immigration.

On an annual basis, more than 250,000 people move to Australia to become permanent residents with about 27% of the country’s 23 million citizens being born overseas.

With a relatively small population, this trend is set to continue. Particularly with an aging population, immigration will play a key role.

Finally, a limited supply of housing stock is another attribute that can cause property values to rise.

With urban sprawl a major issue in most Australian capital cities, many state governments have turned to development infill targets.

This means large land plots in capital cities are becoming scarcer as villa, unit and apartment complexes replace traditional stand-alone dwellings.

Despite some capital cities displaying these four attributes, some locations will prove to outperform others.

As always though, property investment should be undertaken with a long-term approach and regardless of the peaks and troughs along the way, if these four attributes are prevalent then the market in that region is likely to perform well .

Be aware that this is just the beginning of property selection. Capital growth from suburb to suburb can vary widely, so it’s important to consider the finer details of property investment to maximise your success.