Are you stuck trying to decide exactly when and where to invest in property? Vacancy Rate statistics may be your answer.
Don’t worry, you're not alone in trying to pick the best locations from over 15,000 suburbs countrywide. There are countless stories of property buyers finding their property market research overly time consuming and (after fighting off the biased property spruikers) they buy on emotion, only to regret this later as their portfolio stalls on one or two properties and costs them each month in negative gearing.
But there is a different way to pick the best areas for your budget using a proven method that relies on hard facts and very smart data-driven research technology.
It all starts with 8 powerful property market indicators that, together, calculate the gap in supply and demand (and therefore capital growth potential in every suburb) for you so you can get back to spending time with your friends and family knowing your property investment portfolio is working hard for you and not the other way around.
Let’s examine one of these 8 powerful property market indicators… Vacancy Rate.
(You can read the whole blog series by using the links in the '8 Supply-Demand Indicators' block)
8 CAPITAL GROWTH INDICATORS
What is Vacancy Rate?
This is the percentage of rental properties that are currently vacant in a suburb. For example, if there are 250 rental properties in a suburb and 5 of them are vacant, then the Vacancy Rate is 5/250 X 100 = 2%.
A low Vacancy Rate is an indicator of demand in an area and this is attractive to property investors. The area is either popular with tenants, who ensure that rental accommodation is never left empty, or there aren’t enough rental options in the area and renters have to compete so they don’t miss out. Either way, this popularity with tenants gives the property investor the promise of strong rental cash flow and, as owner occupiers usually also flock to an area which is popular with tenants, it is also a strong indicator of imminent capital growth.
Don’t forget to use the Vacancy Rate to estimate cash flow (i.e. rental income) when assessing any potential rental investments, as many investors miss this trick!
Where you can get Vacancy Rate stats
To work out Vacancy Rates in an area you need to know how many properties there are for rent in the area and how many are currently listed as available for rent. This data is available on the property portals and from the Australian Bureau of Statistics but you would need to estimate this information and track it over time to get an accurate picture.
To choose the best location for your needs, you would also have to collate and compare this data for 15,000 suburbs, and this is obviously a challenge even for the Excel spreadsheet data scientist in all of us.
Of course, we have made this easy for you with our suburb research tool, Boomscore! Check the Vacancy Rate stats for 15,000+ suburbs split by units and houses in Boomscore’s Suburb Profiler. Who knows, if all the other indicators support a low Vacancy Rate figure, then you may be the first to spot a suburb set to Boom.
BOOMSCORE - BIG DATA & ARTIFICIAL INTELLIGENCE (AI)
Big data and AI capability makes it possible for the Boomscore capital growth calculator to crunch the data for each of the 15,000 Australian property markets. A task few could do manually even if they knew how. Boomscore simply means you can now find safer locations where prices are most likely to increase faster. Over the past 10 years, Boomscore’s data algorithms have outperformed the ‘hotspot’ picks of some of the more recognised property market research gurus. In fact my (then) 6 year old daughter showed them how easily it’s done using just a few clicks on Boomscore (read how).
Boomscore rates every suburb (by house or unit) out of 100 based on how they perform across the 8 supply-demand indicators in this series. The higher the Boom Score, the more demand exceeds supply, which greatly increases the probability of property value rises in that location for that property type. Get Boomscore.
But be careful with Vacancy Rate ...
It can be difficult to work out the vacancy rate for a suburb as some data providers publish Vacancy Rates for post codes only (and some postcodes have over 100 suburbs!) while others drill down too far and provide data for the various types of properties in a suburb. This can make it a challenge to estimate correctly.
You also need to be aware that some property managers can list their currently tenanted properties as available in the future, as this would throw your Vacancy Rate calculations out.
In closing ...
Property prices, and therefore capital growth potential, are influenced by a number of factors. If you understand these factors and how to work with the capital growth indicators available to you, then there is no reason why you can't find the best investment locations to suit your strategy.
There are 15,000 suburbs in Australia - that’s 30,000 property markets (if you take into account the Unit and House markets in each suburb). Despite what the macro property market is doing, there are always viable micro markets out there… and it may come down to one particular street in one particular suburb. In order to find these nugget suburbs you need to compare the data for all 15,000 suburbs (and 30,000 markets) against one another to rank order them and let the cream of the crop float to the surface. And to crunch the numbers you need to have a good understanding of the importance of the data and how to work with it to find or track your chosen suburbs.
If any of our blogs on the subject have peaked your interest, you can download our Free Essential Guide to Property Market Research, or attend our in-depth (but affordably priced) online property research training course (coming soon ~ register your interest now!). And we encourage you to use Boomscore, our tried and tested suburb ranking tool to get you started.
Read next blog ... Gross Rental Yield