1 / 15

How to Find Capital Growth Hot Spots

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.

rosalyn-petersen
Download Presentation

How to Find Capital Growth Hot Spots

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. How to Find Capital Growth Hot Spots

  2. First Understand Capital Growth Drivers • There are two main types of capital growth drivers : • Extrinsic, and • Intrinsic

  3. Extrinsic Factors Interest Rates Economic Conditions Sentiment 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

  4. Extrinsic Factors Interest Rates Economic Conditions Sentiment Extrinsic Factors Demand Supply 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?

  5. Understanding the Demand/ Supply Umbrella • To understand this capital growth demand/ supply umbrella first understand how cities expand: • Cities expand in concentric circles from their point of origin. Take for example Auckland, New Zealand:

  6. Concentric Circle Theory Albany Henderson New Lynn Te Atatu Avondale Waterview Ponsonby Takapuna Waiheke CBD Kingsland Great Barrier Mt Eden Parnell One Tree Hill Epsom Mission Bay Onehunga Remuera Glendowie Ellerslie Mt Wellinton Glen Innes Botany Downs Otahuhu Otara Flat Bush Manurewa

  7. Ripple Affect • Imagine you were looking down on the last slide • Now let’s look at it from the side

  8. Ripple Effect

  9. Ripple Affect • What we see is that, as one suburb becomes unaffordable for a segment of the population that would have typically bought in that area, then they overflow to the next circle. • The fundamental question then is…

  10. Overflow Question • When extrinsic factors kick off a property boom, which concentric circle will the greatest number of buyers flow to, and within that circle which suburbs will they buy in. • So now let’s return to the demand & supply umbrella to analyse these drivers in property terms. • They will tell us about an area’s ability to grow long into the future. Most areas show they can grow, but it’s how strong that growth will be and whether that growth continues that is vitally important. In order to buy property that has characteristics for sustained growth we need to consider the intrinsic factors.

  11. Intrinsic Factors that drive LONG TERM Growth Demand Supply Population Population growth Demographic makeup 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.

  12. Intrinsic Factors that drive LONG TERM Growth Demand Supply Population Land & Use of Population growth Demographic makeup Accessibility Land development Community development 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.

  13. Intrinsic Factors that Drive Long Term Growth Demand Supply Population Land & Use of Population growth Demographic makeup Accessibility Land development Community development • Past growth and Projected growth by natural increase (births and deaths) and migration • Population size – is it conducive to steady growth • What type of people live there – age, income levels, family types; what are their housing needs? • Employment in area or close by? • Rental prices: in keeping with median incomes? • Public Transportation - buses - rail • Roading • Land availability/ release of new land • Intensification of zoning • Building/ Development approvals by council New schoolsRecreation facilitiesParksCafesRetail shopping CommercialEntertainment

  14. Capital Growth Driver Overview Extrinsic Factors Intrinsic Factors

  15. Where to Now? • Hopefully you now know what you need to know. • The next step is start researching and reading and speaking to the right people. Don’t start physically searching for a property untill you are really confident about the areas you think will generate maximum capital growth. • Once you’ve done this then you are ready to create your buying profile. Contact us for our complimentary profile template.

More Related