7 capital growth indicators to make a savvy property investment

7-capital-growth-indicators-to-make-a-savvy-property-investment

Let the numbers do the talking to prove an area’s profit potential

When you buy a home, you’ll probably consider all the emotional factors that you must ignore as a property investor. Great views from your bedroom window. Friendly neighbours. The property’s windows, and the aspect of the front door.

When you’re investing in property, potential all boils down to supply and demand. This will dictate current and potential capital growth and rental income. You’ll need to ensure that the location in which you invest benefits from strong property fundamentals: shops, schools, transport links, major employment and major investment. As I say, the fundamentals buy the property, not the deal.

In my last article, I outlined the financial reasons to invest cash savings in UK property today. In this article, you’ll learn about seven indicators you could use to assess the capital growth potential of investment property opportunities. Sales agents are going to hate me for giving you these tools. Your pocket will love me.

1.      Buying demand

Where demand is higher than supply, prices rise faster as competition for each home on the market increases. If the average time on the market is decreasing, this is a good indicator that demand is higher than supply.

2.      Discounts to asking prices

If the discounts on asking prices are getting larger, it’s an indication that demand is weak, and that sellers are being forced to accept lower offers. The reverse is also true: if discounts are narrowing, and perhaps buyers are budding over asking prices, then demand is strong.

3.      Owner-occupier-to-tenanted ratio

Ideally, you would like a proportion of owner-occupiers to tenants that is weighted heavily towards owner-occupiers. Low numbers of tenants mean that there will be less competition for your buy-to-let property. Owner-occupiers tend to look after their property better, which has a positive impact on the surrounding area.

Good demand for your investment is indicated especially if a high ratio of owner-occupiers is accompanied by low void periods and vacant properties.

4.      Void periods and vacant properties

When investing in buy-to-let, you should consider current void periods and vacant properties. The numbers of vacant properties and the length of void periods are good indicators of demand for rental property. You want both numbers to be low.

5.      Numbers of buyers/tenants searching for property

This may be the crudest of these demand/supply measurement tools, but it is also one of the most telling. If there are lots of people wanting to buy or rent in an area where supply is limited, then higher rents and higher prices are on their way.

6.      Rents are rising

Rising rental prices are often an indicator that improved capital growth is on the horizon. It is easier to rent than to get a mortgage and buy. So, tenants are usually the first to move into an upcoming location, and it is this influx of tenants that pushes rental prices higher. Rental yields rise, which encourages more property investors to buy. Owner-occupiers start buying, too. This demand to buy pushes property values higher.

7.      Shortage of properties for sale

How do you measure a shortage of properties for sale? Compare to the total number of properties in a location. If this is a low ratio, it’s a good indicator that people don’t want to move out of the area. Then compare with the time on the market and discounts to asking prices.

Put it all together before you invest

By using these tools to measure supply and demand, you’ll have a much clearer view of an area’s potential for capital growth. The supply and demand equation is the basis for your profit potential – where demand outweighs supply, prices rise. It is the most fundamental economic concept of all.

Do you want to know where the best places to invest in property UK are today? Where the property fundamentals are so strong that they are driving all these above indicators into positive alignment?

Contact Gladfish today on +44 207 923 6100 . We’ve done the hard work for you. With our research and track record behind you, the potential of your cash savings could be realised as you move faster towards achieving your lifestyle goals through property investment.

Live with passion and fun,

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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