How to Find Capital Growth Hot Spots. First Understand Capital Growth Drivers. There are two main types of capital growth drivers : Extrinsic, and Intrinsic. Extrinsic Factors. Interest Rates. Economic Conditions. Sentiment.
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Have the greatest impact on when, how big and how long a property boom will be. Factors like interest rates, global economic conditions, sentiment.
As individuals we have little control over these factors. However, the important thing is to ensure we are holding enough property before the next boom to achieve our planned results. See our presentation on property cycles.
In picking capital growth hot spots we are more interested in understanding intrinsic factors
So we have extrinsic factors that broadly fuel a property boom and impact the intrinsic factors of demand and supply. But as capital growth hot spot hunters we are more interested in the intrinsic factors of demand and supply.
What are these demand and supply factors?
One Tree Hill
Firstly the demand side. We want to know how much the population will grow by, where that growth will occur, and what the population will be like – i.e. the demographics.
Secondly, the median house price is where most people are buying at any point in time. Who buys at the median? Typically the first home buyer. Sure there are first home buyers that can afford more expensive homes, but most will buy around the median.
So we think it makes sense to start by focusing attention on the band in the concentric circle where houses are selling at the median, then refining that by looking at where population growth is likely to occur.
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Now the supply side. We want to know that there is housing availability at the median house price, but not too much of it, that it is accessible and that there are amenities and culture that will make it attractive to live there.
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