Episode Details

While it's not rocket science, it's not easy to research our property markets given the array of jargon and information and the many mixed messages that are out there.

So, in today's podcast, I would like to chat with you about some of the many sources of research data that we look into to ensure we make good investment decisions for ourselves and our clients at Metropole.

You'll hear me explain the importance of data but also how even more important is the ability to put the plethora of information into perspective, as I share with you several metrics that we look at when deciding where to invest.

And just as importantly, I'm going to share with you one very commonly used data metric that most investors use but at Metropole we almost totally ignore. And I'll explain why you should also.

5 Metrics You Should Use and 1 That You Shouldn't

If you're looking to assess a property's investment potential, use these 5 metrics work as a starting point.

1. Past sales history

We look at past capital growth to give us an indication of future growth potential.

While past performance is obviously not a guarantee of future performance, the fundamentals rarely change.

2. Days on market

Days on Market is a measure of how long it takes to sell a typical property in a particular suburb.

This statistic helps investors to identify those locations that are strengthening so they can buy before the masses and therefore make the most of the price uplift as the time on market decreases.

3. Depth of Market

What we're looking for here is an assessment of the supply vs demand balance within a particular market.

This is a measure of how long it will take for the current inventory to be absorbed completely based on the current rate of monthly sales, assuming there are is no more new inventory being added to the market.

4. Ratio of owner-occupiers to renters.

While many beginning investors have their prospective tenant top of mind, an important strand of Metropole's Six Stranded Strategic Approach is to buy a property with an owner-occupier appeal.

This is because owner-occupiers "make the market" and add stability to property values in those suburbs where there is a predominance of established owner-occupiers b who bought their homes many years ago and have significant equity in their properties.

5. Above average wages growth vs state average

Since property investment is a game of finance with some houses thrown in the middle, it's important to find locations where the local residents have higher disposable income than average and suburbs where wages are growing faster than the state averages; as in these locations people will be able to afford to, and usually be prepared to, pay more to buy new homes or upgrade their homes.

You'll often find these suburbs are going through gentrification. Here you want to focus on the trend of how the wages growth in a particular suburb is trending against the state average. The faster at which it outpaces the state average, the better.

What we don't rely on – Median prices

Most beginning investors use median price growth as their guidance for suburb selection

How is median calculated

Be careful – observing the change in median property prices may not be as useful as you think.

While median house prices are one of the most cited property market statistics as with any single measure there are some shortcomings that investors need to understand in order not to be misled with what's really happening to house price values.

How is the median price calculated?

The median house price is essentially the sale price of the middle home in a list of sales where the sales are arranged in order from lowest to highest price.

This is different fro