17 December 2017

Why we invest in owner-occupier suburbs

Demographics is an important member of the 15 Key Investments Drivers Sound Property uses for strategic property investment. Along with determining household income and size, this research includes targeting areas and dwelling types that local owner-occupiers would have demand for.

Owner-occupiers will generally exercise more emotion when purchasing property than investors. They are motivated buyers and will often pay a premium in an attempt to secure their family’s nest. It is important for an investor to identify locations and types of dwellings sought after by owner-occupiers. For example, in a family orientated area, where the average household size is 3.6 members, a one bedroom unit or studio might not have the same demand as a 2 or 3 bedroom house. Without demand both capital growth and rental yields can be negatively impacted.

In times of difficulties, owner-occupiers are less likely to put their properties for sale. On the other hand, an investor could not only sell but also discount the property, taking advantage of taxation benefits by offsetting those losses against future capital gains. In this scenario, property valuations of a whole area can be negatively impacted. For this reason, areas with high number of investors tend to be assessed as more volatile than owner occupied suburbs.

Owner-occupier areas are generally away from CBD centres in lower density areas with restrictions on development and supply. This can reduce the risk of potential over-supply which can also inhibit the returns of a property investment.

CoreLogic Investor Report 2016

CoreLogic Investor Report 2016

– Read full report

There are various demographic features to look for, and avoid, when investing in property.

Attractive ‘owner-occupier’ features to look for:

  • Highly rated Schools. Being located in a popular School catchment can add significantly to prices.
  • Family friendly streetscape and location including parks, transport and shops
  • Demographic matched dwelling types eg Units or Houses, Number of bedrooms vs
  • Average household sizes
  • Above average incomes and mortgage affordability
  • Established areas with limited land supply
  • Restricted zoning and density
  • Low unemployment

Owner Occupier property investment

Typical ‘Investor-grade’ features to avoid:

  • High density areas and over populated areas
  • Over 50% renters in an area
  • Purchaser bonuses or sweeteners such as rental guarantees and paid stamp duty for new property
  • One bedroom units and studios
  • Located on a busy road
  • Basic fixtures and finishes
  • Greenfield estates on the edge of the urban sprawl

Matching dwelling types to the demographic is just one way to maximise growth and minimise rental vacancy in an investment. It is important to research demographics in context with the other Key Investment Drivers, and never look at any one driver in isolation. For example, if there is owner-occupier demand for a certain dwelling type and location, but the affordability is strained already, locals may not have enough disposable income to support price growth.

Holistic research must be undertaken to ensure maximum growth and minimum risk.

Contact us today on 1300 655 899 to discuss a property investment strategy tailored to your needs.

This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest.