Hi Everyone,
I'm trying out Peter Spann's advice in his book "How you cold build a $10 million property portfolio in 10 years" on identifying high growth suburbs.
Just wondering if anyone has followed his method and can explain this to me "use median price growth – 1 year and cross reference them against 3-year growth to determine the suburbs that had started growing above their normal rates." (page 63 if you have the book)
What does he mean by cross-reference?
Eg:
Suburb – Bronte
Annual growth % over 10 yrs = 12.9
Median 12 month growth % = (-19.2)
Capital Growth median prices % change 2008,2009,2010 = 0.4, -14.5, 1.0 (average -4.4%)Data from API, Domain and Rpdata. Do I take the average of the past 3 years' growth and compare with 12 month growth?
How can median 12 month growth be -19.2 while capital growth median price change is 1.0 for 2010?As you can see i'm pretty confused. I'd appreciate some help and advice before I continue calculating in this manner for each suburb i'm interested in.
Thanks in advance
JoYou have to be careful using median price as a high priced sale can change the median price.
If say a 4 million dollar property sold the previous year or month and then you look at the median price the next year or 12 month period and there wasn't a 4 million dollar sale the median price could drop by 19.2%
Also is the data from the same provider as API does change data providers and this can change the median price between different data providers.
What you really need to do is take a 12 month average and get yourself a Metropolitan Map and a pin board and go out and buy some different coloured map pins and use different colours for each growth rate. Then put the pins into the map and you will see patterns.
What you want to look for is 10% to about 12% growth in a suburb that borders a suburb or suburbs that are at 20% plus growth.
Suburbs next to high growth suburbs will become the next high growth suburb when buyers can no longer afford the high prices in the higher growth suburb and then they buy in the next neighbouring suburb.
You may also see trends that follow infrastructure as well.
Once you see what suburb looks good then check it against longer 3 to ten year growth rates to confirm what the map is telling you.Beware However you need to be in a high growth property market cycle which may not be the case at the moment with interest rates increases being the trend.
From memory Peter does warn about that this method is not an exact science but more of a crystal ball method.Hi Duckster,
I am comparing data from different sources : annual growth over 10 yrs and 12month median growth from APi and 3 year growth from RPdata.
I can really understand your logic there. Almost all authors I've read talked about the ripple effect and i will try your suggestion instead as it sounds a lot easier. We've been talking about buying an investment property for ages but haven't done anything about it besides from read and research. I think we'll give it a go and hold it because I'm worried if I dont do something now we may put it off for another 5 years. Better to be in it now than not right?
Thanks for the advice, i really appreciate it.
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