Capital Growth Heatmaps and Demand Profile Pt. 4

In part 3 of our blog series, we highlighted the benefits of Growth Rate Cycle (GRC) feature. In this post we will provide an overview of the last 2 tabs on HtAG LGA pages – Heatmaps and Demand Profile.

Heatmap tab is a different way of presenting the GRC information in that it permits to look for meaningful relationships between areas and find growth clusters. It is a bird’s eye view of the council area that not only highlights the geography of growth, so to speak, but also enables customers to ascertain growth corridors within a particular property market that might possess better fundamentals and thus be of higher investment quality.

Identifying the geography of growth allows customers to pick and choose high investment-grade suburbs respective to their current financial circumstances. This means that a customer with a long-term investment window can potentially opt for areas with lower median values and rates of growth, while being comforted by the fact that these suburbs form part of broader growth clusters and/or corridors which will protect the suburb from any exorbitant declines in years to come.

Heatmaps

In the case of Camden Council (map below), all areas except two (Camden and Catherine Field) are experiencing negative YoY growth. More so, Camden and Catherine Field are on the opposite side of each other, meaning that in case of Camden Council, one would find it challenging to ascertain growth clusters or corridors that connect to more than one suburb based on their positive growth patterns.

By clicking on the “i” marker, one is able to find out the name of the suburb in question, its median price, growth for 2020 and number of sales as per below map. One is also able to switch between units and houses by clicking on the ‘unit’ tab in the top right-hand corner of the page.

Another thing to note that might not be too obvious is that the heat map has a scale of growth, which highlights the colouring associated with YoY growth percentage. This means that, for example, the green and light green areas have experienced 16-25% YoY growth which becomes evident when we click on the only green area on the map (Catherine Field) and see that the area has experienced 34% YoY growth.

What is important to note about this information is that looking at the YoY growth alone is not sufficient as although Catherine Field might be experiencing higher than average growth, its forecast confidence is low, meaning that its forecasted growth will potentially have an error rate of up to 15% due to the small number of sales made to date (Q3).

Furthermore, looking at its GRC (chart below), we can see that the area’s growth rate cycles are not stable and have experienced a negative growth of -22.73% in 2017, thus highlighting less than balanced market fundamentals.

This is a perfect example of why a single feature alone, such as YOY growth in this instance, cannot serve for sound decision making and why all of HtAG’s service features need to be accounted for in unison to minimise investment risk. More importantly, the usefulness of HtAG’s confidence feature becomes even more apparent when considered in terms of Catherine Field growth rate graph above, which shows that the area has experienced approximately 35% increase in its median value from 2018 to 2020 which is not a sustainable increase based on solid market fundamentals such a persistently balanced supply and demand ration.

Scatter Maps

The heatmap tab also provides a scatterplot which permits for a more detailed assessment of the market by way of identifying high demand clusters within a particular area. As the scatterplot feature highlights, the concentration of sales within a particular Council or a suburb, such information can delineate high demand sections of suburbs and/or streets for those who seek to minimise risks associated with subdued demand for property.

To assist with the decision making, however, and find a section of the councils and suburbs which are most in-demand, customers can switch between a heatmap and a scatter plot to ascertain localities with the highest level of activity. This can be indicative of higher demand.

The scatter plot indicates higher activity in suburbs such as Narellan Vale, Spring Farm, Harington Park and Oran Park, meaning that when prices rebound into positive growth category, this corridor is well-positioned for growth. Furthermore, by enlarging the scatter plot, customers can ascertain levels of activity in different subsections of suburbs and streets, delineating those with higher demand profiles, which provides the opportunity to make decisions with reduced levels of risk.

Demand Profile

The most obvious benefit of using the Demand Profile tab is to ascertain which type of dwelling is most in-demand within a particular property market.

When combined with the heatmap option, not only is one able to find out growth clusters within a locality or high demand section of a locality via a scatterplot, but also ascertain which type of property will be most sought after within the LGA.

This brings me to the not so obvious benefit of using the demand profile page, namely one which can be leveraged when assessing investment grade of single properties. Utilising the number of bedrooms information, a customer can determine not only what type of property (in terms of bedrooms) is mostly sought after within a particular ‘growth corridor’, but also ascertain the investment grade of any particular property in terms of the number of bedrooms and HtAG’s forecasts for properties of similar composition.

Conclusion

Overall, it is important for every customer to consider all features and pages on the website in unison. As it was evident in this blog post, a heat map alone is not as useful as when combined with a scatterplot which provides a more focused view of demand concertation.

Notwithstanding this, however, each page and feature on the website has been created to satisfy a particular investment need. For example, the demand profile page permits customers to minimise the risk of purchasing idle properties by providing information on which dwelling type is most in demand. Furthermore, the demand profile page also assists customers in ascertaining whether a specific property is overvalued (or undervalued) thus helping them not to overextend themselves at auctions.

Have you found another use for the demand profile data? Please share it in the comment section below.

However, before a feature is assessed for its usability, a customer needs to understand his or her situation (financial or otherwise) and have a clear strategy in mind. This will have an impact on what meaning is extracted from each feature or/and a combination of features.

Although this might sound daunting, it is not. It simply states that a customer should know how much they are prepared to spend for an investment while also having a strategy in mind which will guide them in considering some areas as opposed to others (for example, having a cash flow as opposed to capital growth focus). Once these couple of elements have been satisfied, HtAG platform will help customers simplify their investment journey. In the process of benchmarking Councils and suburbs based on a particular criterion, the platform also aims to educate its customers by assisting them to challenge the taken for granted truisms (for example, high capital growth does not mean high investment quality).

Overall, we believe property investment should be simple and fun.

Happy investing!

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