It is crucial for investors to read the demographic story of an area as it largely determines what type of property will be in demand, and the kind of tenants they should target.
From median age to household compositions, demographic data sets offer a wealth of information. However, investors need to know how to interpret this data.
According to Mark McCrindle, social demographer at McCrindle Research, investors can use the median age to see whether there is generally an older or younger population in the community, and to track generational change.
“It’s not just the current median age. Getting a historic snapshot - so what it was at the previous census or five years ago - is also useful,” Mr McCrindle says.
Comparing the two ages will reveal whether the tenants in the area are getting older or younger, and direction the suburb is heading.
“There’s perhaps an older generation moving out, maybe it’s becoming a bit more gentrified, a bit trendy, or maybe there’s a reason for it in terms of changed attitude to this area or affordability,” he explains.
While looking at the numbers is a great place to start, Victor Kumar encourages investors to dig a little deeper, which can be done through some simple and practical research.
He advises investors to physically visit the area they are interested to invest in, and ask real estate agents - in particular property managers - for the following information:
- The typical tenant in the suburb
- How much a particular type of property would rent for
- The arrears rate in the area
- Improvements that can be made to the property to make it more attractive
It’s not just about relying on the Australian Bureau of Statistics demographic data sets, Mr Kumar says, it’s about physically driving through that area to get a feel for what sort of tenants you’re likely going to end up with.
To kick-start your research this weekend, visit Smart Property Investment’s suburb research tool.
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