Expert Bust #25 Buy prop for demog

Here’s a great example of how to misinterpret data like an expert…

Let’s say 80% of the properties in a suburb are houses. Some experts would recommend investors buy a house not a unit, since that’s what tenants in the suburb obviously demand.

But the properties in the suburb are those that have been supplied to that suburb – not demanded by tenants. Imagine getting supply and demand round the wrong way.

What if the vacancy rate for houses is much higher than for units? That would mean there is insufficient demand to match the supply. This is the complete opposite of how the expert interpreted the demographic.

And what about the household make-up, maybe the vast majority of residents are families. Does that mean accommodation for singles isn’t demanded? No, it means it isn’t supplied. There could be a queue of lone occupants waiting for a 1-bedder to become available.

What we really need to know is what properties are in demand but not supplied. There’s nothing in this demographic data that is a lead indicator of future growth.