How to crunch the right numbers for property profit

What’s the secret ingredient? According to Mr Lindeman, it’s data.

But not just any data – according to the Property Power Partners CEO, a key error that many investors make is failing to sift the relevant data points from a sea of distractions.

Too often, he argued, people “look at the wrong numbers”. By focusing on isolated data points and current market conditions, investors fail to identify opportunities for future growth.

“I can see a period of solid growth ahead of us for the next few years,” Mr Lindeman predicted. Many people claim that a city like Sydney “can’t go up because it’s unaffordable,” but he believes they are “looking at the wrong fundamentals”.

“No one actually goes out and buys a property for cash unless they’re a downsizer,” he noted. “Most people have to borrow money.”

He stated that instead of measuring unaffordability in terms of the value of property: “It should be measured in terms of, ‘How easy is it to raise? How much deposit do I need, and then can I afford the repayments?’”

From Mr Lindeman’s perspective, the main dynamics are not prices, but people. When he wants to locate markets with strong potential, he charts “population growth and movement”.

“When people move into an area, they need housing, and therefore that increases the demand for housing.” With this demand for housing comes a need for finance, so “How much can they borrow?” And finally, “the actual ratio of supply to demand” will determine growth patterns.

“Just look at the whole of Sydney or even NSW, and then look at the population growth figures and you’ll see, ‘Hang on – it doesn’t add up.’ The demand for housing is exceeding the supply that we have,” observed Mr Lindeman.

This relationship between supply and demand is the reason why he believes, against all appearances to the contrary, that the country’s property markets can expect to see growth.

He observed that last financial year, a record 525,000 people arrived in Australia. “That’s a huge number of people and there just simply aren’t enough properties for them to live in,” he said.

In sought-after locations around established communities, universities or workplaces, the expert noted that the massive shortfall of properties will push rents up, which in turn will attract investors and boost cash flow.

“I think we’re on the cusp of another property market boom,” he said.

To apply this supply-and-demand analysis to a specific local suburb, Mr Lindeman recommends looking at three core data points: number of sales, number of listings, and median time on market.

“If the number of sales is going up, that means that demand is obviously increasing. If the number of listings is going down, that’s another indicator that demand is going up and the supply is falling.”

And if the median time on market – not average, which the analyst warns is notoriously unreliable – is between 30 and 60 days, the market is “perfect”: quick, but not so quick that no one can get a foot in the door.

“There’s a lot of growth opportunity if you look in the right areas,” Mr Lindeman observed – and with the right data, it’s easier to know where to look.

Listen to the full conversation here.