Every home buyer wants to be assured of strong capital gain and their dream is to buy in the next ‘boom’ suburb, where values increase more, sometimes a huge amount more than the average. Most people know that the best suburbs to buy in are those with good infrastructure and amenities offering their residents quality of life and convenience. Obviously, life is easier if there is close proximity to a CBD with excellent transport and amenities such as parks, shops, cafes, restaurants, bars, schools and hospitals. But there is one thing that many people don’t factor in.
Supply of housing and the potential for further development is one of the greatest factors putting pressure on prices. If a suburb is already fully developed, then an increase in demand will not come with an increase in supply as it might in a new housing estate, but rather it will force prices up as more buyers compete for scarcer housing stock. This has a compounding effect as the population of the city gets bigger and the city spreads more.
If you think you have found a place that is about to boom, make sure you research the reason for the boom. Demand based on short term need doesn’t last and may leave the buyer with a property that is worth less than they paid for it. Examples of short term boom conditions are often seen in tourist areas based on overseas tourism so that when the dollar increases in value or there is international terrorist anxiety, tourism is reduced to a trickle and houses are harder to rent and therefore even harder to sell.
If you want to buy as near the CBD as possible, but prices are forcing you further out, make sure you look for a suburb on a direct transport line (preferably rail) to the city.
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