To avoid missing out on a property investment opportunity, you need to adopt a structured and balanced approach to your analysis. Without a consistent approach, with an analytical mindset, you can easily let ripe-for-investment areas slip through the net, or lean towards somewhere for the wrong reasons.
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To keep things simple, it’s often convenient to think about property investment as a balancing act between supply and demand. Firstly, you will want to find an area that shows enough demand (or prospective demand) to make the investment viable, and at the same time, you need to consider oversaturation. You don’t want to purchase a property where there is an oversupply of existing housing, which would saturate the market and suppress prices.
But how do you find those Goldilocks areas that are just hot enough but not overheated?
Let’s find out.
Macro View
To analyse an area, it’s often advisable to start with the bigger picture.
The macro view will tell you a lot about employment trends, transport infrastructure, university presence and any ongoing or proposed regeneration or development projects in the area.
All these are known to drive and sustain demand for housing in an area.
And remember, it’s demand that is going to give you the best chance of achieving the rent yield or capital gains you are after when investing in property.
Demand
Demand drives price, and price will ultimately determine how much rent you can charge or the size of the capital gains you realise once the property has been sold.
There is no easy way to analyse how much demand there will be for housing, but as a rule of thumb, look for the following demographics in an area:
- Graduates and young professionals, especially in commuter belts
- A large student body at a local university or college
- Established families
- Workers in key industries and public sector workers
Supply
Healthy demand is good, but if it’s already being met by existing supply, you will have a fight on your hands making headway against established landlords and property developers in an area.
Above-average investment returns are often driven by getting a first-mover advantage, so look for areas where there is demand but not an oversupply.
Areas where this is often the case include:
- Council regeneration plans
- Local enterprise zones
- Waterfront redevelopments
- Large corporate relocation zones
Regeneration
If you can find an area that has been down on its luck but has won local or central government cash for regeneration, you can often get in at the early stages.
For example, the luxury units offered by Vita Living Circle Square can be found in the recently renovated Circle Square, Manchester, which is a major regeneration project of the site of the former BBC studios on Oxford Road.
Conclusion
The macro and wider trends in an area should inform your analysis of an area you are thinking about investing in, but it’s also important not to forget the micro trends.
Analysis of a house price heat map is often a useful visual tool that informs your analysis and gives you an overview of both macro and micro trends in an area.