Using Data to Your Advantage When Buying Property
Successful property investment is equal parts science and art. In our last article, we spoke about the fundamentals of investing, including risk management, understanding property cycles and more. In this blog, we take a look at the ‘science’ aspect: The importance of data and how to put the plethora of information into perspective. From understanding the data around property investment, to using this data to your advantage – it’s critical to take data and analytics into account.
Understanding the fundamentals of property purchasing is incredibly important if you’re to make wise investment decisions, whether buying the family home or purchasing an investment property to add to your portfolio. However, what is often overlooked is the data of property investment. While fundamentals such as price cycles and growth potential are going to help you narrow down your search, actual hard data should be something you consider before even diving into the fundamental aspects of property investment.
Supply and demand of housing will always have a great impact on property pricing, as is the case with any market. Understanding how supply and demand are being affected, and will be affected into the future, is the key to making smart investment decisions. Knowing how to predict these fluctuations in supply and demand comes down to interpreting the data.
Of course, when we talk about ‘data’ we are referring to statistics and analytics produced by research. These kinds of figures are not subjective – which can be the case when considering fundamentals – but are objective; the cold, hard facts, if you will. So, what are the statistics we want to look at? There are a few key analytics to consider, these include:
- Number of property sales in the area
- Auction/clearance rates and days on the market
- Pricing estimates
- Median housing prices
- Vacancy rates
- Rental return rates
- Consumer confidence rates
- Growth rates (year-on-year and past several years)
Some analytics sites will also give you extra data for any given area, such as:
- Lifestyle scores
- Family scores
- Convenience scores
- Affluence scores
- Communications scores
- Tranquillity scores
These kinds of data will give you an objective picture about the performance of housing in the area, and even show you key differences between different property options such as 3- or 4-bedroom homes versus apartments, and whether one suburb has a better auction clearance rate than another, for example. Breaking down these figures into specific suburbs can give you a firm idea of which suburbs have traditionally performed better and can help you narrow down your search drastically.
The ‘score’ data listed above helps to give you a picture of the nuances of each suburb, such as lifestyle and affluence. These can give you a clearer idea of the types of residents or demographics in the area, who you can expect in the rental market, and the benefits for families between suburbs, for example.
With such a wealth of information available, it’s important to be sure you don’t suffer from analysis paralysis. Getting too bogged down in the data can see you make the worst investment decision of all, which is to make no decision. Simply use the available data to help you narrow down your search, start working with the fundamentals we spoke about in our earlier article, then get out there and start your property hunt.
Quality over quantity
There are countless data sources available to you when you’re searching for property. Some of these sources are paid, such as CoreLogic and Price Finder, and can provide you with reliable, accurate information for your property hunt. There are also plenty of free options available, and a simple Google search will show you just how many are out there. The likes of realestate.com.au and Microburbs provide some great, free resources on property data.
The most important thing is to find quality data, over huge quantities of data. Choose a handful of trusted resources and base your analysis on these, rather than trying to read what each and every site has to say. The ABS has a great resource for finding quick property data based on the postcodes you’re looking at. See it here.
That being said, having all the data in the world won’t help if you don’t know how to properly interpret it. The data you’re reading can often appear to conflict and having a clear understanding of how to decipher what you find is just as important as the data itself.
Of course, understanding the data does not come naturally to many of us. When presented with statistics and analysis, your eyes might glaze over, no matter how invested you are in understanding the data. Having an expert on hand to help you decipher the information is important. Your buyer’s agent has a wealth of knowledge when it comes to understanding and interpreting property data and can assist you with your property hunt by doing the research for you. They’re already subscribed to many of the best paid property data resources, and spend their days scouring through this information for the best property investment options. Be sure to engage the services of an experienced and trusted buyer’s agent with a reputation for success.
The key to using property data to aid in your search includes:
- Know what to look for
- Understand what it means
- Know where to find accurate and reliable data
- Decide which data is relevant to your search
- Use it to help you make a decision
- Don’t get caught out by analysis paralysis
Are you ready to begin your property hunt? For expert help in understanding the data and using it to your advantage, get in touch with Porters House.