How do you find the best deals on property? It can be a tough task, but with HtAG Analytics, it’s no longer a difficult process. In this post we’ll show you how to locate markets that fit your budget and have high returns.
Are you new to property investing? We recommend defining your investment strategy before diving into market analysis. It will arm you with the required data to better match property markets to your individual circumstances.
Table of Contents
Getting Started
We have subscribed on the professional plan, logged in to the platform and navigated to the main dashboard. The first thing we see is a map of Australia.
Australia is presented as one big heatmap, which permits us to drill down into council area (LGA) and suburb annual price change, gross yield and Relative Composite Scores for Capital Growth, Cashflow and Lower Risk metrics. Darker blue indicates higher than average growth, gross yield, capital growth score etc.
The Heatmap provides a visual representation of the current state of various markets across the country, as well as their potential investment returns. Users can easily switch between different views using the radio buttons located to the right. For further guidance on how to use the Heatmap, please refer to our guide.
Note: Price change on the heatmap is calculated as percent difference between the current Typical Price and price from the same period last year. We will be referring to annual percent difference in prices as YoY (Year on Year) growth in this post.
Ranking Table Price and Yield Filters
Although the heatmap provides a great bird’s eye view into the emerging market hotspots, we need to understand what are goals are before beginning to make sense of the data.
Overall, which area one chooses to analyse depends on their investment strategy. The strategy subsumes considerations such as:
- the amount of money available for investment
- gross yield of properties in the area
- number of bedrooms (if applicable)
These considerations all translate into a set of filters presented in the ranking table just below the heatmap. Here is the screenshot of the main ranking table filters that pertain to these points.
- Max Price filter lets you exclude areas that are above your budget. Enter it in (K) multiples of $1,000.
- Min Yield filter allows to filter out areas offering less than desired gross yield. Minimum of 3% is recommended.
- Use the Beds filter to ‘drill down’ to data relevant to a property type you’re interested in. For example a 4 bedroom house.
The default view represents relevant statistics for ‘All’ bedrooms, which is an average typical value of 2, 3, 4, 5 bedroom houses in this LGA/Suburb.
Working with the Ranking Table
Aside from the filters on the top left hand-side of the table, there are additional controls that let you switch between several data views:
- State or Capital city view lets you reduce the list of council areas or suburbs to a geographical region of your interest.
- Council Area vs Suburb view displays the list of suburbs instead of council areas.
- Houses vs Units view shows the data for units instead of the default view for houses.
You can also search for an LGA or suburb using the search box on the right hand-side. Take care to spell the area names correctly as this search is typo sensitive. If you don’t remember the exact spelling of a suburb or LGA, use the site-wide search by clicking on the search icon on the top-right of the site’s nav bar.
Note: HtAG ‘Units’ data pertains to the following property types: Unit, Apartment, Studio. Data for houses is calculated off the back of free standing house sales. We exclude data for Villas and Townhouses from the ‘Houses’ dataset.
Although the ranking table provides quick access to data relevant to your initial criteria, we recommend downloading the statistics in excel format to all real estate professionals. This enables you to apply more advanced filters and formulas to the data.
You can download the Market Insights statistics from the Reports section on the website. It is available free of charge on the Professional subscription.
Optional Data Toggles
If chosen, the data toggles just below the table provide additional columns to the default table view:
- Standard View: Price, Monthly Sales, Gross Yield, Projected Capital Growth, RCS™ Scores
- Advanced View: Standard View + Advanced Metrics
- Expert View: Advanced View + Historical Price and Rent Changes + Total ROI + Confidence / Error Rate
The toggles are optional so as to avoid overwhelming the users with too much data. According to user feedback, more than 10 active columns have a negative impact on understanding of the key metrics presented.
Click on the Expert toggle to enable all metrics available. You will need to scroll to the right (or roll your mouse wheel down on Apple devices) in order to see all columns.
Now that we understand the key metrics and the controls of the ranking table, we will ‘segway’ to exploring strategy implications of the returned data.
How to Compare Any Number of Suburbs
HtAG Analytics is a powerful tool designed to help make your suburb comparison process simpler and more efficient. In this section we’ll show you how to leverage our ranking table to compare any number of suburbs in just a few easy steps.
- Navigate to the ‘Suburbs’ Toggle: Start off by navigating to the Suburbs toggle on the platform. It’s here that you’ll find access to suburb-level data.
- Access the ‘Expert View’: For an in-depth analysis, click on ‘Expert View’. This view is designed to give you a detailed, comparative picture of different suburbs.
- Add Conditions: To bring up the suburbs you’re interested in, add conditions using the ‘Area equals’ filter. This filter enables you to add specific suburbs to your comparison table.
- Apply the ‘OR’ Filter: After typing in a suburb under ‘Area equals’, apply the ‘OR’ filter. This allows you to add additional suburbs to your comparison table without limiting your results to a single area.
Continue adding as many suburbs as you’d like to your list. Just remember to keep the ‘OR’ filter on to ensure they all selected suburbs show up in the table.
Now, you can easily analyse and compare suburb data right at your fingertips. Use this guide whenever you need to create a new suburb comparison table.
Gross Yield, Capital Growth & Total ROI
The 5 columns in the ranking table define indicative returns from any given property market:
- Gross Yield (calculated based on current typical price and annual rental return)
- Capital Growth (averaged per annum growth based on forecasted price trend)
- Total ROI = Gross Yield + Capital Growth
These are the key parameters we should be focusing on when assessing any relevant property market.
Property investors use gross yield as one key starting criteria to benchmark potential cashflow return from the relevant property market. It is derived by dividing the total annual rent by typical price.
CG (Capital Growth) Low / High values are calculated off the back of projected trend for price growth in a particular market. Because of the forecast uncertainty, the CG and ROI metrics are represented as a range bounded by Low and High values.
The CG forecasted range is produced via long-term trend modelling and calculated as possible annual growth. Given a long enough time frame, some future years may have growth towards the higher end of the range and some years may land on the lower side.
Advanced Fundamental & Supply/Demand Metrics
The advanced GRC, Fundamental, Supply and Demand metrics on the right hand side of the table help determine a more likely value for CG and Total ROI.
Important: As a rule of thumb, the advanced metric values that fall in the following ranges are likely to result in higher market ROI (closer to the value shown in Total ROI column on screenshot above):
- opportune / neutral ranges for fundamental metrics
- low / balanced ranges for supply metrics
- high / balanced ranges for demand metrics
It’s preferable to have as many opportune and low supply / high demand advanced metrics as possible to ensure higher than average long-term market growth.
It’s fine to have some low range demand / high range supply metrics, providing the fundamental indicators are opportune or neutral and the trend for supply/demand metrics is in favourable or neutral direction.
See the data dictionary for the full list of metrics and their ranges.
Assessment of Supply/Demand Metric Trends
It’s essential for the data to be indicating diminishing supply and/or increasing demand levels. This is why we not only have to assess the metric values but also their trend.
Important: Here are ideal trends for supply/demand metrics that point towards highly opportune market conditions:
Supply metrics listed in order of significance:
- SoM% trending down ↓
- Inventory trending down ↓
- Building approvals trending down ↓
- Hold periods trending up ↑
Demand metrics listed in order of significance:
- DoM trending down ↓
- Vacancy rates trending down ↓
- Search index trending up ↑
- Clearance rates trending up ↑
You can visualise the trend for these metrics by clicking on the area title in the ranking table which will take you to the data dashboard for that particular market.
Summary
Generally, long-term investors should focus on the total return that meets their financial goals. We measure Total Return on Investment (ROI) by combining averaged annual gross yield and capital growth metrics. This is a convenient way to calculate the potential returns of any real estate market.
When it comes to choosing the right market for your investment, there is no immediate need to spend hours analysing columns of data or looking at charts we described above. Relative Composite Score (RCS) simplifies the process by providing an in-depth assessment of markets based on three crucial criteria: Capital Growth, Cashflow and Risk.
RCS offers an extensive evaluation of real estate metrics we described above, including 30 more internal metrics, enabling you to swiftly and accurately identify the ideal market for your investment. Our dashboards provide deep dives into the supply and demand dynamics, as well as market fundamentals charts, so you can confidently confirm the market outlook established by RCS if you chose to.
Next Steps: Platform Demo Video & RCS™
Ready to take your property investment journey a step further? Dive into our top two resources to streamline your decision-making process.
- Dive deeper with our comprehensive Platform Demo. In the demo, we walk you step-by-step through our platform, showing you how to match your budget and strategy to the best property markets. It’s an in-depth look at how our platform can mould to your specific requirements, maximising your investment potential.
- Discover the advantages of Relative Composite Score and how it simplifies market analysis through the metrics outlined above. We suggest beginning with RCS before delving deeper into other market metrics with the help of our dashboards.
Please note that at times of writing this blog, for a neutrally geared portfolio one would have to find properties with a gross yield of approximately 10%. More on this here.
We have exemplified the output concerns via the property ‘flipping’ scenario. Let’s explore other key points any type of investor should be keeping in mind.
Will I develop the property bought in Camden Council? Developments have an approximately 2-year lag from conception to realisation. The short-term projected rate of growth becomes very pertinent for developers.
Will the investment property form part of a cash flow geared portfolio that needs to be balanced? In this instance, projected capital growth becomes important. Investors should look for areas with imminent growth projections.
Will the investment property form part of capital growth geared portfolio that needs to be balanced? In this instance, the projected change in rents is important. The cash flow potential of the area balances the existing portfolio focused on capital growth.
What is the preferred time frame for holding the property? Short term investors can take advantage of the impending market conditions. Long-term investors should consider a more extended outlook.
What is the most suitable suburb to invest in within a particular Council? There are submarkets within markets. In other words, suburbs within the council may or may not fit our broad investment needs.
Updated the post with latest screenshots from the platform.
Updated Input Concerns section with explanation on how to apply advanced metrics to gauge possible ROI.
The implications of understanding how long an area will exhibit positive returns largely depends on what I call ‘output concerns’. Essentially, the output concerns are related to the ‘use’ of the investment. That is, what one plans to achieve by investing in a particular area.
Take an investor who is buying in a particular area to renovate and ‘flip’ the property as an example. The amount of time prices in the area continue growing becomes highly pertinent. Were I such an investor, I would want to know the short-term market outlook for the time it takes me to buy the property, renovate and sell it.
As such, even though at the current time of buying a property an area may have a desired total return, the forecasted growth rate can signal that the area will plateau in the coming year. This can have a negative effect on the short-term potential to realise the desired return once I sell the property.
In other words, the only ‘value add’ to the property will be the renovations. Without the compound effect of market capital gains.
Overall, there is a lot that needs to be considered before beginning to interact with the data presented. In summary, before moving on, investors should have clarity on the following:
Property Investment Input Concerns:
What is my investment strategy? Do I focus on cashflow or capital growth or both?
How much money do I have to spend and what is my price entry ceiling?
Can I maintain the acquired investment when I take into the account my financial circumstance and the indicative Gross Yield?
Property Investment Output Concerns:
Am I looking to renovate and ‘flip’ the property?
Will I add value to the property by additional development?
Do I want to balance my existing portfolio?
Or am I just beginning my investment journey?
Please note this is not an exhaustive list and will vary based on individual circumstance. As you can see, the market parameters relevant to your particular situation can be quite unique, depending on how you answer the questions.
To assess the strategic considerations of a market, let us pose a series of ‘what if’ questions: What is the yearly projected Capital Growth of the area, based on the data? Would an increase in rent offset the potential decrease in property value, should the capital growth of the area be negative? Might one receive more return on their investments by investing in other areas?
Real estate professionals refer to this type of analysis as ‘opportunity cost’, which requires weighing the potential benefits of investing in this particular market against the potential benefits of investing in other areas.
Very helpful. Thanks
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Hi Terry – I am a Buyers Agent with an active professional membership with HtAG already. Cheers