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Investors ask: Understanding the economy

Q. I know that I should be keeping an eye on economic news and trends when searching for my next investment location, but I don’t quite know what I should be looking out for. In Melbourne, for example, how will the economy help decide where I should be looking?

A. Well property markets, good or bad, are always driven by economic forces. So a healthy economy is essential when you’re looking for your next investment location.

In the example of Melbourne, recently we’ve heard reports about the impending closure of very large manufacturing factories – Qantas, Holden, Toyota etc. That shows it’s not a good time to be investing in Melbourne, because if you fast forward a couple of years down the track to when these factories are closed, there are going to be a lot of people in the unemployment queue. Unless the local government authorities have some pretty tangible means of finding alternative employment for these people, demand for accommodation in a market like that is going to diminish.

So you need to understand economic forces – usually things related to employment opportunities. If you have a potential investment location where, eg. the economy is largely driven by tourism and the outlook for tourism is healthy, that is one piece of information that can give you confidence in that particular market – and we could say the same about any industry.

Simon Pressley, managing director, Propertyology

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Investors ask: Understanding the economy
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