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Where investors should buy next
“Where should I buy next?” is one of the most common questions I am asked as a property investment adviser, writes Arjun Paliwal.
Investors understandably want a suburb, city, or postcode they can research. But after helping more than 2,000 clients purchase over 3,000 properties, representing more than $2 billion in acquisitions and creating more than $500 million in equity, I think there is a more useful question.
Instead of asking where prices have risen the most, investors should ask where the conditions for the next period of growth are beginning to form.
Property investment is inherently forward-looking.
The fact that a market performed strongly over the previous five years does not mean it will lead over the next five. Chasing locations after substantial growth has already occurred can mean investors enter too late in the cycle.
Recent performance demonstrates why investors also need to look beyond the traditional capital-city hierarchy.
But perhaps more importantly, investors need to understand that different markets can be at very different stages of their cycles.
Victoria provides a good example.
InvestorKit has been buying in Melbourne, Geelong, Ballarat, and Bendigo for some time. Today, the data is showing why identifying those markets early in their cycle matters.
Greater Melbourne’s median house price has increased 4.0 per cent over the past year, with inventory tightening to around 2.5 months of stock and days on market trending downward. Within Melbourne, Brimbank recorded 7.6 per cent annual growth and Cardinia 6.1 per cent, demonstrating how city-wide averages can disguise stronger-performing pockets.
Geelong has recorded 7.5 per cent annual house price growth and is experiencing relatively high sales market pressure, while Bendigo has recorded 12.1 per cent growth and inventory has tightened to just 2.3 months of stock.
Ballarat is another market showing stronger momentum. InvestorKit’s Housing Fundamentals Analysis found median house prices increased 13.2 per cent over the past year, with days on market trending downward and inventory tightening to 2.1 months of stock. Vacancy is around 0.5 per cent, while rents have increased 4.7 per cent.
The lesson is not simply that these markets have grown. It is that investors who identify improving conditions earlier in a cycle can participate in that growth rather than waiting until it becomes obvious in the headline data.
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We are now seeing another compelling growth story in Tasmania.
InvestorKit’s latest Housing Fundamentals Analysis found regional Tasmania is emerging as one of Australia’s fastest-growing regional markets.
Launceston’s median house price has increased 13.0 per cent over the past year, days on market have declined considerably, and inventory is sitting at just 1.3 months of stock. Vacancy is around 0.4 per cent, rents are up 12.2 per cent, and investors can expect a rental yield of approximately 4.8 per cent.
Greater Hobart is also strengthening. House prices are up 5.6 per cent, inventory has fallen to approximately 2.1 months of stock, and vacancy is just 0.2 per cent. Relative affordability is also making Hobart and the broader Tasmanian market increasingly appealing to buyers and investors.
There are also a number of NSW markets worth watching closely.
Wagga Wagga has recorded 11.6 per cent annual house price growth, while days on market have declined considerably and inventory has fallen to around 2.0 months of stock. Vacancy sits at approximately 0.8 per cent, rents are up 10.0 per cent over the year and rental yield is around 4.7 per cent.
Albury-Wodonga is showing similar characteristics. House prices have increased 10.9 per cent over the past year, days on market are falling, and inventory is sitting at around 2.9 months, tightening to 2.2 months on the Albury side. Vacancy is approximately 0.8 per cent and rental yield sits at 4.5 per cent.
Newcastle is another market I would keep on the radar. InvestorKit’s research rates its sales market as relatively high pressure, with house prices increasing 12.2 per cent over the past year and inventory sitting at just 1.6 months of stock.
Its rental market is also relatively high pressure, with vacancy around 1.0 per cent, rents up 7.4 per cent and rental yield at approximately 3.8 per cent.
But investors should not simply choose a location because its numbers look good today.
The starting point should still be the relationship between housing supply and demand.
Population growth matters, but population alone is not enough. Investors need to understand why people are moving to a location, whether there are sufficient employment opportunities to retain them and whether the local economy can sustain housing demand.
Affordability is another increasingly important factor. It affects not only an investor’s entry price, but also the depth of the future owner-occupier buyer pool.
Rental conditions provide another important signal. Tight vacancies and rising rents can indicate genuine pressure between housing supply and demand, particularly when combined with low inventory and improving buyer urgency.
At InvestorKit, our proprietary EDGE (Evaluation Data and Growth Engine) platform analyses thousands of suburbs and hundreds of indicators to understand how these conditions are changing. We monitor 65 markets because opportunity does not remain in one location indefinitely.
Market selection is only the first stage. Investors then need to consider the individual suburb, future supply pipeline, owner-occupier demand, rental conditions and quality of the property itself.
The best place to buy next is not necessarily the market that performed best yesterday. It is the market where the fundamentals are positioning it to perform tomorrow.
Arjun Paliwal is the CEO of InvestorKit.
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