Property prices increase on ‘True Demand’

[PK Gupta]

Recently I talked about how proximity to good amenities is not a good sole indicator of suburb growth.

There are property markets that have had features like good transport, schools, employment, shopping and so on for decades. But they haven’t had above average capital growth for decades. So obviously this isn’t the only key to strong capital growth.

So what really does drive price growth? What is ‘True Demand’? We need to distinguish ‘True Demand’ from ‘Wishful Desire’.

You see, a young boy may desire a Ferrari, but that isn’t demand. It’s only ‘Wishful Desire’. Only very well-off people can actually afford a Ferrari. That’s ‘True Demand’.
Demand is the desire AND ability to purchase something.

One of the fastest killers of demand is a recent period of high price growth. People start to reason, “It’s too much. I can’t afford it”. They find more affordable options, better value for money elsewhere.

The best areas to live in Australia have been relatively unchanged for a long time. But they have not had the best capital growth for all of that time. This is because a big surge in prices eventually subdues demand.

So you can see that although some locations will always be “desired” there will not always be ‘True Demand’ for them. There are over 20 statistics that determine ‘True Demand’. One of these is Online Search Interest. Find a suburb with hundreds of hits surrounding each listed property

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