Investing in property is one of the best ways to build wealth, but it’s not without its risks.
The key to any property purchase lies in choosing the right location, and for me, the best way to assess a suburb’s potential for growth is to look at its historical performance. Some may argue against this strategy, but it’s all about one simple principle: not losing money. Partnering with a buyers advocacy service can help streamline this process, as they bring expertise and local market knowledge to the table.
In reality, making money in the short term doesn’t mean much if you lose it in five years. That’s why I focus on making sure that the location I invest in has a proven track record of growth.
A suburb with a steady historical performance gives me confidence that my investment is less likely to lose value over time. There’s no shortage of tools to help investors assess a suburb’s history and you need to look back at least 15-20 years. This can help you identify patterns, price trends and the overall stability of a suburb’s growth.
You can also use recently sold property data and sales histories on the main listing portals which can determine whether the property has consistently appreciated in value over time. For example, if you find that properties in the area have sold for progressively higher prices with each resale, that’s a strong indicator of steady market growth. This kind of data is often leveraged by buyers advocacy experts to guide their clients.
One of the biggest red flags for me is volatility. Suburbs that have experienced significant price drops in the past are far riskier investments. Take some regional markets as an example.
Townsville, Rockhampton and similar locations have seen properties sell for less than their previous purchase price, even five or ten years later. While these areas might have had short bursts of growth, their volatility makes them unpredictable and from my perspective, unpredictability equals risk.
In contrast, suburbs with a stable history of consistent growth, even if the rate of growth isn’t extreme, provide a stronger foundation. Stability means you’re less likely to lose money, even during market downturns.
Some argue that historical data isn’t a reliable predictor of future performance. While it’s true that past results don’t guarantee the future, they do provide valuable insights.
A suburb’s historical growth reflects its desirability, infrastructure, and long-term appeal, factors that often continue to drive demand.
For instance, in a city like Sydney, suburbs with a strong track record tend to attract ongoing interest due to their amenities, proximity to employment hubs and overall liveability. These are qualities that don’t change overnight, making them reliable indicators of future potential.
Ignoring a suburb’s history can also lead to costly mistakes. It’s easy to get swept up in hype or short-term trends, especially when markets experience a temporary boom.
However, investing in a location without understanding its long-term performance exposes you to unnecessary risk. A suburb that looks promising today might have a history of sharp declines, leaving you vulnerable to losing money if the market shifts.
Assessing a suburb’s growth potential doesn’t need to be complicated. With tools like CoreLogic or free resources such as realestate.com.au, you can gain a clear picture of how a market has performed over the years.
For me, it’s as simple as looking at the sales history of 20 properties in a suburb. If they’ve consistently sold for more with each transaction, that’s a suburb I feel confident investing in.
When it comes to property investment, I believe in minimising risk by relying on proven data and avoiding volatile markets. A stable suburb with a strong track record gives you the confidence that your investment will grow over time.
So don’t go out there and chase speculative markets or short-term gains. Focus on areas with a history of consistent growth. That’s going to be how you build a property portfolio that is going to hold you in good stead for the long term.
Engaging a trusted buyers agent at Henderson’s buyers advocacy service is your best chance at navigating the competitive real estate market.
