As we enter into a
brand new start of 2021, I will like to share my personal thoughts of using
fundamental and technical analysis of investing in Perth property market.
There are many ups and
downs, twists and turns in every property cycle, so regardless of the timing of
the cycle, as a long-term investor, you need to ensure that the fundamentals of
the property market you want to enter is strong.
For me, I will like to
look into the followings for fundamental analysis:
1) Population growth rate
The first thing you need to find out is whether
people are moving into this area for work and living. Local government area
usually would release population forecast and actual number of people moving in
and how fast it is. Study the population trend and you would have a clear
picture of its implications of your investment property.
2) Planning activities by
the local, state and federal government
Have a good understanding of the city plan that
laid down by the local, state and federal government. From the planning activities,
you would have an overview of how the land is been used. The keynote of looking
at the planning activities is to understand the premium of the land, and that
has a strong implication in the purchase price of the property.
3) Supply and demand
From the population growth rate that you have
found out in point 1, you would be able to determine the demand of dwellings
needed. Divide the actual number of people migrating into this area by 4 per
household; then divide by 12 months. You would get the supply number in which
local government needs to build in order to meet the demand of dwellings
needed.
I always feel that
stock markets and property markets behave one thing very differently, and that
is speed. You can press the button on your computer to trigger long/short
position of the selected stock within seconds and deal is done. But, for
property, the speed of transaction is not within seconds. Hence, by using
technical analysis for property investment is mainly to assist us to know the
current market sentiment of the location that we want to invest into. However,
technical analysis can be difficult due to lack of transaction activities or
information.
For me, I will like to
look into the followings for technical analysis:
1) Auction clearance rate
This data showed the percentage of sold properties
at auction on a particular week or month. You can use this as a guide to
determine the number of buyers and sellers in the market. A high clearance rate
generally indicates a growing property market while a low clearance rate may
indicate a slowing property market.
2) Days on market
This data basically helps the seller to have a
good feel of how long it takes to sell a property. Hence, when days on market
is getting shorter, you may want to consider to sell off and when they get
longer, you may want to hold.
3) Median house price
This data gives an indication of how the
property market is doing especially where property prices are moving.
In summary, start off
with fundamental analysis of the specific location and real estate asset type
that you want to enter into. After you have zero in the property that you want,
proceed with technical analysis. By combining both approaches, I hope it will
help you to invest property in a right location at a right time.
What is your thought on
this?
Please feel free to
share your thoughts and views in my blog or Facebook Page.
I look forward to hearing your valuable insights.
Stay safe
and keep healthy.
