Can you judge growth to come?

There is a wonderful little disclaimer that most developers and investment houses stick on their advertisements. It reads like this.

Past performance is not an indicator of future growth. Consult your investment advisor for more details.

Reason why? The future is gloriously unpredictable. And the best you will ever get to go on .. is the overlying trends. So if you see shops closing down .. for lease signs everywhere .. dirty streets .. long grass, broken fences … rubbish on the front lawn .. its usually a sign that things are bad. HOWEVER, swinging for an upside is also hard. If you are buying in an area thats losing population (go for a 10yr or 5yr movement more than a short 3yr movement .. trends are never a good guide) you are  asking for trouble, since there will be more dwellings and less people demanding them.

The magic word here is still TRENDS. I am aware of one suburb that moved up and down for a period of six years based on a certain restaurant that was top notch in the vicinity. The best thing to validate your prospective purchase is look for multiple trends that will be improving the attractiveness of your property. New homebuyers, more developments, better shops, good shopping centres, cleaner streets, and good councils are all things you look for. Oh yes .. dont forget the good restaurants.

Those figures look like they might be unreliable for judging real growth, medians can be very volatile, much better to look into direct resales and see how they have fared. There are also housing index providers that do a good job, I don't pay attention to median data mostly.

Generally I would say that Perth has to be looking interesting at the moment on a national scale due just to it's extended flat period.

My top 3 capitals for 2011-2012 in no particular order would be Brisbane, Sydney & Perth.

Hi Frank,

Past result and statistics should always be questioned. This is especially the case with median house prices. A few reason why median prices can be skewed include:

1) Subdividing large parcels of land into smaller blocks can cause the "median" prices to drop, but per sqr mtr prices to increase.
2) An increase in new units can skew median prices upwards.
3) The introduction of government grants (FHOG) caused volumes of cheaper properties to increase. This caused drops in median even though more expensive properties above the threshold were still selling at the same price.
4) Medians mathmatically always have an upward bias.

I wouldn't want to comment specifically on Maddington as we don't buy in that area. My tip when selecting invesment property, always use factors other the previous median results to make your selection. These include but not limited to, future supply, public "crowding in", transport, demographic changes and compre it with other invstmets in other suburbs (opportunity cost).

A lot of this stuff comes from understanding areas in detail and studying them over a period of time. For future supply two of a many areas we look to include forewarned zoning changes (what will be built on these sites) and geography (is there land physically available).

Demographics can be a little harder, because ABS stuff is often out of date. Not that we don't use this. I like driving the area at different times and looking at crime rates put out by WAPOL over time. How will the NRAS properties in Maddington effect your investment long term or where are they all located?

Now looking at every property in detail like this is too time consuming. To cut down your time I suggest using a top down approach where you will start with a broad Local Government Area and work your way down to streets you are comfortable with. So instead of looking at 15,000 properties in Perth you may be only looking at 200 and find 5 suitable.

People say, you spend so much time analysing property and making sure it’s a good investment. I stress that even just 1% average more then the market over 10 years on a 400k property is an extra 75k in capital gains. Meaning you can buy more properties sooner.