What Triggers Capital Growth? 8 Signs to Look Out for Before Investing in a Suburb

Picking a winning investment is all about knowing which markets are about to rise in value, and getting in early enough to ride the wave. By taking advantage of capital growth wherever you can, you can make property portfolio flourish and turn short term investments into long term returns.

So what are the telling factors that a suburb’s value is about to soar? 

1. The average time on market is falling

If demand in a particular market is surpassing supply, any available property will be snapped up quickly and the time property spends on the market will noticeably drop. So keep a look out for suburbs with properties spending low average days on market because this is a sure sign of high demand.

2. A drop in discounting

Growth suburbs have a high level of competition, and vendors will stop offering discounts to attract more buyers because demand is high enough not to need it.

3. A rise in auctions

Properties will often be sold by auction when demand for them is strong because auctions have the unique potential to push a selling price even higher. A rise in auctions and high auction clearance rates in a particular suburb could be a sign of a surging market.

4. Falling vacancy rates

In general, a 3% vacancy rate indicates a balanced market – anything below that means a shortage in rental properties, and a rate above that means a surplus. If a suburb’s vacancy rate is low, there are more tenants in the market than available rental properties and this often results in rent and price increases as investors seize the opportunity for higher returns.

5. Growing rental yields

A rising yield is generally an indicator of capital growth because as a suburb grows in popularity more tenants will move there and the rental rates will rise. Investors then follow, attracted by the higher yields, and this leads to a rise in buying activity.

6. Fewer available properties

If there is less stock on the market, it means that owners aren’t selling and any property available is being quickly snapped up.

7. A lot of online interest

Strong demand in the way of many people searching for properties in a particular suburb where there aren't enough available for sale is usually a good indication that values in that suburb are rising.

8. A long period of underperformance

If a suburb has been underperforming for a while – and markets close by are on the rise – it’s a hint that the suburb is about to see a surge in growth as well. And the good news is that in most cases, the longer a suburb has been underperforming, the faster the reco