Market Trend and Potential as well as Supply & Demand Factors
If you’re simply searching for markets with the highest rental growth for the past few years, then you’re starting off on the wrong foot .
We aim to deliver much needed capital for SME’s and Property Developers.
Factors to Focus on When Searching for a Great Buy-to-Let Rental Market
Population Growth
What to look for: Cities with 1.5 percent minimum year-over-year (YoY) growth for the past two decades and more than 100,000 people.
Household Income Growth
What to look for: Household income growing at 1 percent minimum YoY for the past two decades.
Without substantial household income growth, there won’t be healthy rental growth. If a city has a strong rental income growth but a weak household income growth, then it’s a sign that its residents are getting priced out of the market. The population growth will start slowing down.
Crime Rate
What to look for: A crime index that has been decreasing consistently for a decade.
A decreasing crime index is a sign that the city is improving. Companies also study the crime index to make sure that their office locations are attractive to workers, especially those with families.
Household Income to Rent Ratio
What to look for: Minimum current median household income to median rent ratio is 4x or more.
This is a great metric for measuring affordability in the area. Make sure you use median, not average, because high household incomes can significantly affect the average.
Employment Growth
What to look for: Minimum employment growth of 2 percent YoY for the past two decades.
Employment growth is a key indicator of the economy. A growing population is not sustainable without good employment growth. However, you should find out what sectors or companies are growing and whether the growth will continue or stop.
Employment Diversity
What to look for: Compare current local employment ratio to national employment ratio.
You should look for cities with good diversity in terms of employment. This means the city’s local ratio should be within a few percent of the national average across all industries.
You want employment diversity to mitigate risks associated with certain industries declining.
Median House Value
What to look for: Look for 2.5 percent YoY growth in median house value in the past two decades.
This is a good indicator of the overall wealth in the city.
Additionally, if the median house value has been increasing consistently for 20 years, then that means it’s expensive to buy a house, forcing renters to stay renters longer.
In Conclusion – Just like Location, Location, Location, Know Your Market – Research, Research, Research
Some good property related data sources
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