How to predict property prices


We have compared Brisbane’s best suburbs HERE. There, we have shown that our property analysis is in line with the algorithm that is outlined. If you did not have the chance to interactively compare suburbs yet, go ahead and use our handy tool HERE .

Out thesis remains the same. Property prices follow a number of metrics, they don’t lead. What we mean by that is the property price is actually a result of a complex interaction between income, wealth, background of the people who live in that suburb and a whole heap of other metrics.

A lot of people compare median property prices over time and use only that to understand and analyse the price of property. Then the extrapolate that to forecast the prices forward. We, generally speaking, don’t believe this is a good approach. Prices and median property values, in our view, are a lagging indicator, they follow and do not lead. Instead we are using a wide range of inputs to understand the behaviour of property market.

Fore example, who new that Redfern in Sydney would gentrify so well? Very few did, and those who did made a fortune. Redfern gentrified not because of property values, the property values followed the gentrification. Variables that impacted Redfern’s gentrification include:

  • High proportion of gay couple, gay couples are an excellent indicator that the area will gentrify soon
  • Significant improvement of socioeconomic advantage metrics of Redfern as more and more couples moved into Redfern from other areas in Sydney
  • Excellent transport links with a train station and major bus thoroughfare.
  • Proximity to CBD
  • Improved educational background of people living in Redfern
  • Improved composition of workforce
  • Growth of creative and media industry

So there is a wide range of attributes that we need to keep an eye on to forecast movements in property prices. The good news? These attributes largely remain the same regardless if we are intending to analyse and buy a property in Brisbane, Sydney, Melbourne or any other city in Australia. We also don’t restrict ourselves to capital cities, regional hubs and regional centers could be interesting when they provide a great value offering.

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