Once you have selected a suburb with good growth potential as shown in the previous keys, you need to narrow down your search. This key shows you how to identify the locality and type of property with the greatest potential to deliver the results you want, no matter what the market conditions are. You will discover how to:

• identify the types of areas preferred by local households
• use the splash effect to narrow down your search
• flip and trade for profit during booms
• hunt for bargains in stressed and buyer markets
• find the next boom market
• conduct your own effective on-the-ground research.

Even when you have selected a suburb that meets your investment aims you will need to refine your search within the suburb, because certain precincts or localities will be different from others. Some streets will be located closer to desirable features, such as:

• shops
• schools
• recreation
• transport

and others closer to less desirable ones, such as:

• industrial areas
• unwanted shops
• traffic noise and issues
• flight paths
• late-night hotels.

Even in the same street, some dwellings will have views while others will be without and one side will have a much better aspect than the other. There will also be distinct pockets of current or former housing commission homes, ex–holiday homes, aged care facilities and other types of accommodation that may or may not be desirable. The prevalence of public housing, for example, may not be unwanted if your target market is permanent rental demand or the opportunity to renovate.

It may also be an area undergoing gentrification, in which case you will notice some refurbished or even totally replaced homes among the others. While the perceived desirability of a property is to some extent factored into its price, its personal desirability for you depends on your investment goals and whether it is the type of housing in the area that suits your aims and whether you can make the property more attractive for future occupants.

Buying the wrong type of property in the right area will impact your chances of success just like buying the right property in the wrong area — you need to get both correct. Table 4.1 shows the critical differences that occupiers look for when choosing their new homes.

You can narrow your search down further by talking to property managers about which households are most likely to rent in the area and by talking to real estate agents to discuss which are most likely to purchase. Having decided which household market to target, you can choose the best location in the area and then select a property that provides the greatest potential uplift in appeal and value with an appropriate cosmetic renovation.

Give your new occupants a sense of belonging

The key here is that whatever you do should be immediately visible and obvious because cosmetic improvements are calling out ‘look at me!’ You may undertake needed improvements such as painting, planting and pruning, but remember that cosmetics are about providing confidence. By providing something that other vendors or landlords would not consider you can make a huge difference. A house for young families can be made safer with child-proof locks on gates, while planter boxes with ready-to-pick herbs will please retirees. A comprehensive selection of local restaurant menus placed in the kitchen immediately appeals to busy couples.

Giving the new occupants a sense of belonging instantly increases the appeal of your property, may not cost much, yet can be really effective in a flat or sluggish market. In addition to using such a strategy, you should always be on the lookout for areas where growth is most likely to occur, so that you can ride the price-growth wave created by both your own improvements and by those that the market itself is generating through higher buyer demand.

Look for areas where imminent price-growth is most likely to occur

The history of the Australian housing market, as explained in Key 1, shows that there have been extended periods of time with little to no house price-growth, and even occasional periods when prices have gone backwards. Although the housing market experienced housing price-growth following such years, it has by no means been equally shared across our cities and towns and there are locations in Australia that have experienced no real price-growth for over a decade.

Such a long-term lack of growth does not mean that rises are imminent, or even that they must eventually occur, but rather the opposite: that we can't be sure housing market increases will always occur. This is because housing prices only go up when the demand for housing rises and leads to shortages of stock on the market. This demand can come from:

• first-home buyers
• upgraders
• retirees.

Each surge in demand may take place at different times and in different locations. Nevertheless, we do know what causes such spikes in demand and therefore we can estimate where and when they will most likely take place after the housing market next takes a breather. Table 4.2 shows how the next housing boom is likely to unfold after many years of housing market stagnation, and which areas are likely to boom first.

This analysis is based on the performance of the housing market in the past, following many years of little to no growth, and what took place during the ensuing boom years, such as the 1950s, 1970s and 2000s. In each case, it was first-home buyers who led the market charge in outer suburbs and started a wave of price-growth that rippled through entire city housing markets.

In 2010 the Rudd government induced a first-home buyer boom, by tripling the first-home owner grant and guaranteeing bank deposits. The guarantee meant that banks were free to lend to first-home buyers because their activities were backed by the government. Since then, there hasn't been much joy in the market for first-home buyers. Their best hope is that once the current growth wave subsides their time may arrive. After a long period of stagnation first-home buyer areas are likely to provide the greatest growth potential for investors.

Housing price-growth and high deposit requirements tend to marginalise aspiring first-home buyers, but they have a vote and eventually the sheer weight of their growing numbers will force governments to act. Federal governments can introduce or increase first-home buyer grants and encourage housing finance providers to lower their deposit level requirements. State governments can reduce, refund or remove stamp duty for first-home buyers and provide their own grants as well.

When you see that governments are introducing such incentives aimed at first-home buyers, the suburbs to look for imminent price-growth are first-home buyer markets and those first-home buyer pockets within higher priced suburbs. The logic of this strategy is simple, but highly effective, because incentives that make it easier for aspiring first-home buyers to enter the market increase the demand but have no immediate effect on the supply, resulting in price rises as potential buyers compete with each other. Even if house prices rise by an amount equal to or even more than the total value of the incentives and grants, it does not deter more first home buyers. You can see how this plays out in the example shown in Table 4.3.

The only other factor that can impact first-home buyer market demand in such a scenario is that repayments tend to rise as the amount borrowed per first-home buyer increases, even though it is still the same percentage of the purchase price in each case. This is usually when lenders come to the rescue with innovative packages such as amortised repayments, allowing for gradually increasing repayments over time. Sometimes lenders may even introduce negative amortisation loans, which simply means that the initial repayments don't cover the interest and extends the period of the loan. As long as housing prices in these areas are forecast to keep rising, the lenders are not at risk. Getting in on the ground floor as an investor at such times gives you the opportunity to participate in the first wave of price-growth in housing markets that have seen no price-growth for many years.

Use the splash effect to help narrow down your search

In Key 3, the ripple effect — the process of price-growth spreading outwards from a growth epicentre to other similar nearby suburbs, or from a major city to regional centres that have not yet gone up in price at all, or not to the same extent — is explained. It is commonly seen as an inevitable consequence of housing price-growth. You can use a very similar phenomenon that I call the splash effect to pick areas in nearby suburbs with similar types of housing to those where prices are shooting upwards, but where prices haven't yet started to rise. The difference between the ripple effect and the splash effect is that the growth in a price splash is limited to those types of housing for which demand is rising, so that the suburb as whole may not rise in price at all. Figure 4.1 shows how the splash effect worked in similar localities of Sydney's inner west suburbs during the housing price boom from 2012 to 2014.

The price of three-bedroom houses in Summer Hill boomed in 2012 even though there was little overall price-growth in the inner west at that time. The rise in price drove buyers for such houses to nearby suburbs such as Leichhardt and Five Dock, and the resultant shortage created a similar three-bedroom house boom in Leichhardt during 2013 — but not in Five Dock, where there was still sufficient stock of such properties on the market to meet the rising demand.

This left Five Dock as the only suburb with no real price-growth in three-bedroom houses in the entire inner west up to that point. According to the splash effect logic, three-bedroom houses in Five Dock would shoot up in price once the market turned from neutral to seller. This did indeed occur and pushed Five Dock's median house price during 2014 up more than the other inner west suburbs. The danger in applying splash effect logic indiscriminately is that nearby suburbs may not have stock shortages and may actually have surpluses, so that, although sales rise, there is no consequent price-growth. Nevertheless, there may be pockets in nearby suburbs or towns that have similar demographics to those where price rises are occurring and where a price splash may take place.

Once you are satisfied that the suburb or the locality within the suburb where you are purchasing meets the requirements for demographics and housing type and, house prices haven't risen yet, you need to check that the ratio of sales and listings shown in Key 2 indicate that this is a neutral market and about to go seller. The splash effect can be very useful as long as you remember that it is specific and not inevitable.

When growth is occurring more or less everywhere and in every type of market, a different strategy is called for to help narrow down your search.

Flip and trade properties for profit in booming markets

Flipping (selling a property almost immediately) and trading (holding a property for less than a year) have little to do with property investment, but while they fail at the wrong time they will certainly work at the right time, which is when:

• housing markets are booming
• bidders are crowding auctions
• properties are sold as soon as they come onto the market.

The practice is simply to buy and hold only for enough time to gain passive price-growth, then sell and repeat the process. Table 4.4 shows how an investor could flip four units in one year, and achieve a gross profit before tax of over $50 000 (allowing for buy and sell costs of 7 per cent of each purchase price).

Choose the right development

Narrowing down your search in such markets and at such times is more about selecting the right development, because you can buy off the plan years before the project is complete, or even fully underway, with just a small deposit bond. This bond requires you to pay the full deposit by a certain agreed date, and then to pay the entire remaining purchase price at settlement, which could be years away. You can flip the property at any time once you have paid the deposit bond, as you are the legal purchaser. Many developers will sell off the initial units or lots at a discount to achieve the pre-sale numbers they need to get finance. As each stage is readied for sale, purchase prices may be pushed up to give potential buyers the impression that prices are rising. This is nonsense, because until the property is sold by the first purchaser, it has never been sold, only bought, and it is extremely difficult to estimate the market value of such properties.

Nevertheless, if you find a new development where the first properties are being pre-sold off the plan at apparently discounted prices to obtain some initial sales, you may get a bargain. There are some risks with this form of property investment that don't occur in others: the first is that the developer, builder or a major contractor may go out of business before the project is complete. This can cause significant delays, unanticipated structural or design changes to the finished product and maybe even loss of your invested funds. The second risk is related to the nature of boom markets — they can change much more quickly than other markets, so that the market may slow down or even bust before you can sell, leaving you caught short with an investment that is worth far less than what you have paid for it.

Hunt for bargains in stressed and buyer markets

Because booms don't last long you should have a strategy waiting in the wings for those times when prices are falling, such as in buyer or even stressed markets, and when they are neutral, but with no prospect of growth in sight. Investing in such markets is completely different to the others because it relies on creating value from negotiating a low sale price rather than building value or waiting for passive growth to start again. It is an unfortunate fact that after a period of rapidly rising interest rates, tight housing finance and falling prices, a number of owners find themselves in trouble and unable to manage their repayments. Others are forced to sell because of work commitments or changing family circumstances, so there are always bargains to be found. Some of these desperate vendors will part with properties for a fraction of their real value because they have no choice but to sell.

While I don't endorse predatory buying practices, there are opportunities to make a blanket offer to all vendors in such markets on a ‘take it or leave it’ approach and there will usually be one or two who will accept because it is the only offer they receive. Other options are to check for mortgagee in-possession auction sales authorised by lenders because they only seek the amount financed, not the value of the property. Narrowing down your search in such areas involves locating suburbs or towns that your research, as shown Key 2, indicates to be buyer or stressed markets. You then narrow down your search to concentrate on localities where buyers most at risk have been active. Table 4.5 shows you what these are and where to find them.

First-home buyers

Lenders know that the period of greatest risk for home loan defaults is in the first year or two of a first-home buyer loan. The borrowers may have over-anticipated their expected income, or they may have overspent on furniture and fittings, interest rates may start to rise or economic conditions could worsen. The major cause of early sales in such areas is family breakups caused by the stress that owning a first home in worsening conditions presents. However, if the borrowers can get through this potential crisis period and maintain their repayments they'll tend to hang on. This is because it is now their home. Owner-occupied new developments therefore present the greatest opportunity for finding bargains in this critical early period.

Discretionary purchases

The second group of potentially stressed owners is comprised of people who make a discretionary property purchase of a holiday house or unit in a popular beachside or mountain resort. This is usually done during economic boom times, and if economic or financial conditions deteriorate, it is the first asset to go. These are often located in areas desired by retirees, who are immune to such economic downturns, so the opportunity is there to pick up a bargain from a stressed owner and then sell it in a few years to a retiree couple.

Off-the-plan and speculative investment

The two other groups of potentially stressed owners are investors. Many investors, especially those located overseas who have no access to on-the-ground information, may buy off-the-plan units for far more than they are really worth, relying on rental guarantees and glossy promises of future price-growth potential. They are often forced to sell when the rental guarantee period expires and the rents they receive suddenly drop dramatically, or disappear altogether while the property is vacant.

You can time these opportunities by narrowing down your search within suburbs where rental surpluses exist (as explained in Key 2) and then look for projects where the rental guarantees are about to end. If you notice a dramatic rise in the number of advertised rental vacancies, you will also start to see properties placed on the market by disillusioned investors, needing to sell because they can't maintain the loan repayments. In some severe cases, such as in Queensland's Gold Coast unit market in 2008 to 2010, the oversupply of rental stock followed by surplus stock on the market led to falls of over 40 per cent in median unit prices. The other investor-created stressed markets are created by speculative purchases — those made in expectation of a new infrastructure project, port development or mine expansion that either does not occur or does not have the anticipated effect on housing demand. While some early investors may have made huge profits during the confidence-building stages, it is the last investors in such markets who suffer the most.

How to find the next potential boom market

Most of the strategies already covered demonstrate the need to narrow down your search within a suburb or town, because there will always be pockets that have more potential than others. It is only when an entire city becomes a boom market that it sweeps everything before it, from houses to units of all sizes and in all locations, but even then there will be some areas that outperform others, because there will still be different types of housing markets providing various levels of growth potential. Key 1 shows you what they are, and Key 2 shows you how to find them.

There are also certain housing markets that can provide both high cash flow and the sort of capital growth sought by speculative investors. These typically start booming because of a local rise in rental demand that is followed by:

• investors moving in
• owner-occupiers buying
• developers providing more supply, and sometimes an oversupply.

This process takes many years to unwind, so that investors at the start will obtain the benefits of high rent growth as well as price-growth. Because the process starts with a rise in rental demand, we need to look at the opportunity-seekers described in Key 3 to see which type of renter might be the catalyst. They might be:

• workers moving to a captive rental market seeking high incomes
• students living away from home in university towns
• casual workers seeking easy work and a relaxing, entertaining lifestyle in tourist resorts.

This last group of opportunity seekers offers the most benefit to housing investors. Every year we receive nearly two and a half million overseas tourists and they bring their money with them, each spending an average of $2500 during their stay. They pump more than $6 billion into the economies of the areas they visit, on:

• travel
• accommodation
• dining
• tours
• entertainment
• souvenirs.

This activity also stimulates local housing markets in the process but, although local communities receive most of the economic benefits of tourism, the housing booms they create are available to investors everywhere. To gain the biggest benefits from housing investment, we simply need to know which locations tourists are likely to visit in future.

While interstate and local tourists tend to favour the same holiday locations from one generation to the next, this is not the case with overseas tourists. Tourism Australia research shows that the destinations they prefer vary widely according to their countries of origin, and that we are about to receive a massive lift in tourist arrivals from China. By identifying the locations where they will stay, we can invest in properties before the booms start and reap the biggest rewards.

Table 4.6 shows how the main industries in a typical rural community both diversify and expand from dependence on one main primary industry to several new industries as tourist markets emerge and then become established.

As a result of these new tourist-related job-creation ventures, such as accommodation, restaurants, tours and entertainment, there is a flow-on effect that engages the whole community, leading to more employment and new businesses in the construction, retail and supply chain industries. In fact, according to the Bureau of Tourism Research Australia, the demand for new jobs can be up to three times the number of tourist arrivals during tourism booms.

Although some local or interstate tourists may take holiday lettings, the vast majority of overseas tourists do not. They holiday in resorts, hotels, hostels or camping areas and caravan parks so there is little direct increased demand for housing in locations where they visit. On the other hand, the rapid rise in the range and number of employment and new business opportunities created by tourist booms has a direct effect on housing demand. Investors can monitor and take advantage of these imminent housing booms because they can easily identify how, where and when they are likely to take place.

Locating the next tourism-related housing boom

Holiday resorts and retreats are located in the most interesting and desirable parts of our country, and tourism is a labour-intensive industry. It offers part-time and casual employment suiting younger people from larger towns and cities who are already attracted to such coastal and country tourist areas for the lifestyle. When the number of tourists to an area starts to rise, one of the first noticeable effects on housing is that the growth in rental demand quickly exceeds the number of tourist arrivals because of the arrival of these young opportunity seekers. The rise in rental demand is closely followed by an increase in demand for owner-occupied housing generated by the owners and managers of new business enterprises.

The growth in diversity and availability of recreational and entertainment facilities also attracts more local and interstate tourists. Some of these holidaymakers are then tempted to buy a holiday home, investment property or future retirement retreat. As the demand for both rentals and owner-occupied properties continues to rise the area comes under the notice of developers who may see opportunities to build medium- to high-rise unit developments and house and land packages on new housing estates. These are predominantly marketed to future retirees and investors and, as the popularity of the locality grows, project marketers will sell many of these as off-the-plan investments to overseas buyers.

This last stage is often the period of greatest sales in the life cycle of a tourism location, and it often occurs when the tourist boom is declining and real demand is falling. Such a sequence of events took place in the Gold Coast housing market, starting from 2000–01 with strong housing price and rent growth, until the onset of the Global Financial Crisis in 2008–09 saw both retiree and overseas investor numbers fall dramatically. The resultant oversupply of high-rise units reached chronic proportions in the following years and may take several more to recover.

Yet the Gold Coast has experienced several past housing booms and busts, as have many other holiday and resort locations. One of the main reasons for this is that overseas tourists tend to favour destinations that best meet their needs for a perfect holiday and, as the numbers of tourists from different countries has changed, so have their preferred destinations in Australia.

In years past, Australia was popular with tourists from Japan, the USA and Europe for specific reasons such as:

• honeymoon locations
• the Outback
• the Great Barrier Reef
• golf courses
• fly-fishing
• big game fishing
• casinos
• theme parks
• the opportunity to enjoy opulent, luxurious accommodation and dining at comparatively low prices.

This led to the creation of resorts specifically designed to cater for these needs, stretching all the way from Tarraleah in southern Tasmania to the Port Douglas Mirage Resort in northern Queensland.

The falling away of tourist numbers to such locations in recent years has been due to a combination of the high Aussie dollar and post–Global Financial Crisis economic recessions in Japan and the USA. The Bureau of Tourism Research has conducted in-depth surveys to ascertain not only where overseas tourists have come from in the past but where they are likely to come from in future. The results indicate that while the numbers of tourists from Japan and the USA are not likely to return to their pre–Global Financial Crisis boom levels in the near future, the number of tourists from China is already rising dramatically and that, by 2020, the number of yearly Chinese tourist arrivals will exceed 1.5 million.

Over half of the expected Chinese tourist arrivals will be aged under 35, and three-quarters will come from the cities of Shanghai, Beijing and Guangzhou. The populations of these three huge cities total nearly three times that of Australia, and comprise many of China's rapidly growing aspiring and current middle-class residents. They work and live in some of the most densely urbanised cities in the world and so when they go on holidays, they prefer something quite different — natural environments and locations with unspoilt world-class beauty that are safe and easily accessible. The priorities that drew tourists from the UK, Europe, USA and Japan are at the bottom of their list.

Armed with this understanding of what Chinese tourists look for when visiting Australia, we can easily see why certain locations are becoming more popular and why some holiday spots are missing altogether from the list shown in Table 4.7.

This destination list demonstrates the popularity of different Australian places with Chinese tourists and indicates where tourism is likely to grow as an industry according to the expected rise in the number of Chinese tourists. While it would seem that such a list of the most popular locations solves our quest to find potential tourist-led boom areas, there are still a few issues. Some of the destinations shown in Table 4.7 are capital cities such as Sydney and Melbourne, and a rapid increase in overseas tourist arrivals is not likely to have any effect on housing prices in those cities. Destinations in the Red Centre and Kakadu are not suitable for private housing investors as there are no freehold properties in the major support towns such as Yulara and Jabiru. Tasmania's popularity stems from the Cradle Mountain–Lake St Clair National Park where accommodation for both employees and tourists is provided. As the nearest sizable city is Devonport, 80 kilometres to the north, it is difficult to assess what impact, if any, overseas tourism will have. The Gold Coast is still recovering from a spate of high-rise unit overdevelopment and reduced housing demand, but the Coast's high popularity with Chinese tourists indicates that another tourist-led housing market boom is not too far away.

To find locations with imminent tourist-led housing boom potential, we need to limit our search to those towns that already have small resident populations and are in the most favoured Chinese tourist destinations shown in Table 4.7 (see p. 115). Some of these will be emerging tourist towns, such as Margaret River in Western Australia and Kangaroo Island in South Australia, where well over 10 per cent of the local working population is employed in tourism-related industries, but the main industries are still farming and horticulture. Others will be transitional tourist towns in the Whitsundays and far north Queensland, where entrepreneurs are refurbishing and re-opening old lavish resorts that were built for a previous generation of tourists from Japan and the USA, updating them to styles preferred by Chinese visitors. These locations are shown in Table 4.8. Because our research has shown that the first boom signs in such towns will be shortages of rental properties and high rental demand, we have tested the rental market to ensure we are selecting towns with the highest growth potential.

The towns shown in Table 4.8 have all the right growth dynamics in place right now and they are where significant rises in the numbers of tourists will put almost immediate pressure on rents and then prices. By investing in such locations we can enjoy the successive housing growth waves caused by overseas tourism, retiree buyers and investors, then sell before the boom slows down. To narrow down your search in such locations you only need to consider where workers in the local tourism industry are likely to live, which will almost invariably be in low-maintenance units or houses close to the town centres. As the tourist market matures and retirees start to move to the area, you will find that they prefer to buy the same types of properties in the same inner locations and will provide you with excellent opportunities to maximise your investment return by selling to them. In other words, avoid high-maintenance houses with large backyards and areas located away from town, or all the high returns you anticipate may not eventuate.

You can see that the method used to narrow down your search depends on the type of housing market and what stage of growth or decline it is in. Each of these housing investment strategies is highly successful if used at the right time. This means that we must be flexible enough to change our strategy to suit the market, not ignore the market because it doesn't suit our strategy.

How to conduct your own online research

From the desktop analysis methods you have used in the previous keys, you should have a good idea of:

• your property price range
• the type of preferred property
• its probable location
• how the property is going to meet your investment goals.

Before you can narrow down your search to specific properties and start searching for them, you need to be certain about the localities that will best meet your needs, and much of this research can be conducted using the internet.

You can Google sites that feature the area such as local government and tourism sites. Discover what makes the area tick. What do most people do for a living? Get a feel for the area. Research its:

• location
• local industry
• recreation
• local climate
• retail, commercial and education facilities
• transport.

Use www.googleearth.com to check what the information is telling you. While using Google Earth, make sure that you have enabled the ‘borders, labels and roads’ layers so that you get a better feel for the area. You can see the shopping and industrial centres, and recent housing developments show up clearly, as do infrastructure developments such as new roads and railways. Keep in mind the dates of the aerial mapping — they are usually not more than a year old. In this way you can compare what the promotional sites, estate agents and developers are telling you to what you can see for yourself. When you look for listed properties that may meet your criteria, keep Google Earth open so that you can check their location.

Conduct on-the-ground research

When your initial research is finished there's only one way to find out if any pieces of the puzzle are still missing, and that's by completing the picture with actual on-the-ground research. This is because housing market stats and your analysis of them can only provide part of the story, and even expert opinion may be based on false assumptions. Your own on-the-ground research can show you whether the published information is right or wrong and may give you new insights into the investment potential of an area that can't be obtained any other way.

On-the-ground research doesn't mean getting in your car and driving around the area, visiting real estate agents and asking them some questions about the local property market. Real estate agents are the last people to visit, and only when you have finished all your other avenues of on-the-ground research. Start with your own personal tour of inspection and drive through the local streets to check the general condition of properties and their presentation.

The following is not an exhaustive list, but shows you how to assess an area's housing market potential. Here is what to look for as you drive through an area:

• Is this a prosperous, go-ahead area with sidewalk cafes and alfresco dining?
• Is this area going nowhere with empty shops and faded ‘to let’ signs everywhere?
• Are people proud of their community, as evidenced by well-maintained lawns and gardens?
• Are there security issues, with gated communities and shuttered shop fronts?
• Are there social issues evidenced by charity outlets and employment agencies?
• Are there many ‘for sale’ signs in some streets, some of which are obviously old?

As mentioned on page 48, also check for signs of overdevel­opment:

• Can you see any large vacant fenced-off land areas?
• Do some roads end abruptly but are obviously intended to go further in the future?
• Are there vacant shopping strips on main roads with no ‘to let’ signs?
• Have you noticed any blocks or groups of vacant, even derelict terraces or houses in an area with medium- to high-rise units?

These are all signs that developers own the land and that more housing will follow. In areas where housing demand and supply are in balance, the sheer weight of new stock numbers can lead to oversupplies. On the other hand, the nature of any new developments may rejuvenate an area and generate further demand for housing.

Seek the editor of the local paper if there is one and talk to officials at the local council office because the locals working there will usually be happy to talk about the latest housing developments and what is likely to drive demand for more housing. Only by asking questions about any possible or proposed developments, their size, type and timing, will you know their likely impact on the local housing market and your possible investment in it. While an increase in housing demand is usually a positive sign that prices may rise, proposed or possible new housing developments may lead to an oversupply. Here are some typical questions that you might ask local officials and townsfolk:

• Is the area adequately sewered?
• Is there town water?
• Are there ever any water restrictions?
• When, where and how serious was the last bushfire?
• When, where and how serious was the last flood?
• Have there been any other natural disasters?
• Where are the local trouble spots and what causes them?
• What sort of households are moving in and why?
• What sort of households are leaving and why?
• What are the major industries of employment?
• Are these industries thriving or struggling?
• Are there any plans for new industries?

You can ask whether people are moving into or out of the area to retire, or to work in a new infrastructure development project, mining expansion or tourism enterprise. Remember that any proposed infrastructure is only relevant in terms of the number of new residents it brings into the area, and during the construction phase they will probably be renters.

The local police are excellent providers of ‘inside’ information and if you can find the local postman, he or she will be able to inform you exactly where the good and bad streets are. The answers you receive from conducting on-the-ground research will either confirm that your desktop research is correct and enable you to proceed with confidence, or they will refute your findings, in which case you need to look elsewhere.

This key showed you how to narrow down your search within a suburb or town to identify the locality and type of property with the greatest potential to deliver the results you want no matter what the market conditions are. The next key to the property market shows you how to decide what property to buy.