“What is The Ripple Effect and How To Predict Property Prices…”
Investing without fear, will the right ripple effect on property prices your purchase? What if you ride ripple effects to maximise your property profits?
Yes, ripple effect applies at any stage of the property cycle.
Researchers call it the ‘ripple out’ effect, property booms usually start in the inner city or prime areas and radiate outwards…
Prices rises in suburbs close to CBD, then spread out to middle-ring suburbs and later to outlying areas.
The ripple effect is when demand for property outstrips supply.
We see property prices rising in a given area (often sharply)…
Generally buyers set a budget and they’re restricted.
This budget restriction results in some buyers being forced out of their original target suburb as prices rise.
Usually buyers want to stay close to their original target suburb so they move to the next suburb they can afford as a compromise.
Trend continues, pushes up prices in adjacent suburb…
This forces buyers that originally targeted adjacent suburb as their primary suburb to move on again.
It means targeting the subsequent adjacent suburb which is based on affordability.
Some factors and stats point to ripple effect as the most powerful driver of all in determining why suburbs increase in value…
This ripple trend continues out to the regional cities as more buyers investigate or weigh-up price discrepancies across towns and cities.
And begins to make lifestyle choices…
Most people underestimate the significance of the ripple effect.
So many aspire to live in a suburb of their choice and they can’t be accommodated.
They end up having to go elsewhere and this usually means moving further out.’
As a savvy property investor it may be possible to take advantage of this demand and trend within the ripple effect.
Just be aware the ripple effect also works in both ways.
When buyers, for example give up on ‘higher priced suburbs and switch to buying quality in the inner city.
The best way to identify outperforming suburbs and the next best suburbs that haven’t yet surged is to analyse price data.
And target suburbs likely to benefit in near future as a result of the right ripple effect.
What if you identified a suburb that hasn’t yet shown any significant price movement?
And yet the adjacent suburb has already shown strong growth?
Would it be worth checking out further?
It could be a pointer to increasing capital growth, right?
Property buyers target suburbs which in the past year have shown under-performance in context to five-year growth averages.
If these suburbs are located beside others with higher growth rates in the past year, they almost always experience a catch-up effect.
Always check council’s website for what’s happening in the zones.
Check planning permits applications submitted and if freeway is not about to slice through an area before you invest.
You should also check whether shopping centres and schools are earmarked for closure.
That could affect the supply and demand plus demographics of the area, which would skew all the price data.
What fuels the ripple effect is any low or medium-income household has to move, either to outer suburbs or switch to a different type of accommodation…
Are ripple effect suburbs an excellent opportunity for property investors?