‘Location, Location, Location’ – Finding Premium Investment Pockets within a suburb

‘Location, Location, Location’ would have to be the preferred catch cry of agents and spruikers from Darwin to Dunalley. It is also, the name given to a very popular and long running national television show! So there must be some truth to this; Location must be important, right?

Let us stop to think for a moment. Which locations are they talking about exactly? In addition, does location affect pricing and demand? Not all locations can be considered equal. Some are preferable, generate higher sales prices today, and have potential for comparatively higher capital gains in the future.

Sometimes when you are looking to purchase in a suburb, these preferred locations may be obvious. The suburb may border the ocean, beach, or there may be a lovely wide tree lined street. These may have long been the in vogue locations in the suburb. But sometimes they may be much more difficult to pinpoint. In these cases, you may be able to look at the different amenities that exist in suburb, where transport hubs are located, or where pricing may be changing in line with more expensive neighbouring suburbs.

Let us start with public amenities, in particular schools and parks. Generally, people are willing to pay a premium for properties that are located within a walking distance to facilities they feel add to their lifestyle, provide convenience, safety or security for their family. For many, this includes the convenience of living close to the schools they send their children, or parks/beaches/playgrounds where they walk their dog or play and socialise. But be careful, properties located too close to these amenities, may be less sought after. This could in part be attributed to the increased traffic from parents dropping off kids, the school bell ringing constantly throughout the day, or a lack of privacy caused by inquisitive dog walkers!

In these cases, I like the one street rule; one street away or up to 500 meters is great. Anything closer than 100 meters and I would be looking elsewhere.

In line with this demand, people value the convenience of living close to their local supermarket, transport hub or bus line. They also love the lifestyle aspect of living nearby their favourite café or restaurant. Once again, living on a busy street with bus access, or near the entrance to a shopping centre really can count against a property. Therefore, the same 100-500 meter band rule applies.

I also like to consider how prices are changing within a suburb. This may be difficult to tell when there are a limited number of properties on the market. In this case, you may be able to detect if a particular pocket within a suburb is piggy backing on a neighbouring suburb with an in vogue status, but not yet has the price tag to match!

In these cases, look for jumps in the number of renovations taking place. This may indicate the number of people buying in this zone who are aspirational, and cannot yet afford to live in the expensive neighbouring suburb. They want the next best thing, so look out for new cafes/delicatessens/shops opening up or general gentrification. An example I love to refer to is the Marrickville district in Inner West Sydney, and how is has undergone a renascence of late. Some (myself included) would argue that this can be attributed to the culture and price tag associated with its North Easterly neighbour; New Town.

So let us bring all this together, and formulate a strategy to help you profile your target suburb, and help you isolate pockets that will be in greater demand in the future (or already are):

1. Locate any Blue chip areas, where prices have long held above the suburb median. These may be areas with ocean/beach frontage, excellent views, or leafy tree lined streets.
2. Locate any suburbs, which have recently undergone gentrification, areas were prices have recently been up trending or aligning with the persona of a neighbouring premium suburb.
3. Locate all amenities, transport and shopping in a suburb – and find pockets of housing that have excellent proximity to these facilities. However, remember; be wary not to purchase property, which is too close.
4. Finally, find overlaps between these blue chip/gentrification zones, with excellent amenity pockets.

If you can find these overlaps within a suburb, and subsequently purchase property there, you may be optimising your potential to secure above average capital gains, when compared to the remainder of the suburb. This will also help to ensure that the property remains in high demand by tenants, consequently driving up rental returns. So with all this in mind, maybe ‘Location, location, location’, and the importance placed on it by agents, may be bedded in truth after all!