Previously we discuss on identifying market trend from the views on historical data and economic aspects. We will now turn our attention to the non-economic factors impacting market trend in the last part of this series.
The primary subjects from the non-economic perspective for our reviews are:
1. Demographic Trend
This indicator may determine the broader target market of the subject area. For example, a major population shift from age above 54 to under 35 in the last 10 years could signify that gentrification has transpired in the area and is targeting the younger generation.
Average Household Income
Income is the key projection of property performance over time. There is a clear correlation between household income and median price of an area. A steady rise in household income could well translate into a sustainable level of growth in property value.
Local Council Plans
The development of large-scale infrastructure projects such as upgrading of major roads or building of new parks, schools and hospitals are signs of a growing population. This has great potential to shore up housing demand and therefore property prices within the area.
2. Occupant Type
Owner occupiers are responsible for establishing the property market value. An area which lacks a general appeal to owner occupiers or has a low volume of owner occupiers will definitely hit a ceiling as to both its medium-term and long-term capital growth prospects.
On the contrary, the drawback for property investors in an owner occupier infested area is its deficiency of market forces to receive a good rental yield from their investments. The ideal owner occupancy to tenancy ratio for investment purposes is at about 70% in order to achieve a desirable balance between capital growth and yield.
3. Dwelling Make-Up
And the last, but certainly not the least important, is evaluating the dwelling make-up of an area. Most locations are generally better regarded for their predominant dwelling type and is therefore highly likely that these properties are going to be more appealing to prospective buyers, which in turn drive up demand for this housing type in that particular area.
On the other hand, we can also argue that scarcity factor may advocate the minority group. In the case of Elanora Heights in NSW where the house to unit ratio is 7 to 3, there will always be good demand for units due to its shortage in supply.
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