How Professional Property Investors Interpret and Use Capital Growth Statistics

Understanding and using yearly price growth statistics in an area of interest is critical to making successful property investments decisions.

Property price growth is usually expressed in terms of a percentage i.e., 10% to 25% or more over a period of a year. But, what does this really mean.

Some property agents would have you believe that you will achieve great capital gains in an area with high capital growth.

The problem with this is that capital growth figures are often skewed by new developments in the area of interest.

An area that experiences a lot of new development will have a high capital growth because the cost to build a new property increases over time but it doesn't mean that older properties will have the same capital growth.

Example;

In Sydney, Australia, a suburb close to the city and on the harbour, Darling Point, experienced apartment capital growth of 68.7% in one year, 2003, but the average the trend has been 9.9% since 1991.

Taking those figures literally means that the average price of apartments in the area has gone up 68.7% i.e., a unit that was $400,000 in 2002 has gone to $675,000 in 2003.

This article may be used provided the resource box below is included. Does this mean that a unit that I purchased in 2002 in an older building went up by $274,800 in one year?

The answer is no. It only went up 9.9% or about $40,000.

Why?

The reported average price growth, expressed as a percentage, takes into account new apartment sales and re-sales of existing apartments. These figures will not accurately represent what is actually happening in the area and can be misleading.

Building costs have rising substantially over the past few years in Australia and USA as a result of the real estate boom.

In Darling Point, Sydney, several new, luxury apartment blocks had been built and sold during this period and they represented a high than normal percentage of apartments sales. As a result the figures for capital growth in the area were skewed upwards.

Older apartment blocks experienced a modest increase in capital growth, consistent with average capital growth figures of 9.9%.

However, this does present other opportunities!

Advertising and marketing of the new, luxury apartment blocks brought potential buyers into the area.

The opportunity for the investor was to purchase an older apartment, to be re-furbished to the same standard as the new ones creating value and benefiting from higher new apartment prices.

This created a similar apartment but at a lower cost. Buyers looking for the same quality internally could obtain this but at a lower price. The buyer has set expectations of value for price and sees the renovated apartment as great value compared with the new ones.

Thus, advantage has been taken of the marketing and building of the new luxury apartment blocks to create good profit for the investor.

This article may be repoduced provided the resource box at the below is included.

John Moore is President of the Property Investors Association of Australia (PIAA) and a Property Consultant. He has helped many people create wealth through property and is dedicated to providing property investors with the knowledge to assist in make prudent property investment decisions. Find out more about Property Investment Strategies and Information from the PIAA web site. http://www.piaa.asn.au

Do You Have the Correct Home Buyer Mindset to be Buying a Home?

By learning what you need to know and preparing how to purchase a home ahead... Read More

How Does Interest Rates Affect New Home Sales and Wheres The Best Place To Build?

These real questions on new home starts and interest rates on real estate are answered... Read More

How to Find the Sweet Spot in Real Estate Investing

Psssssssssst, Want to know a great way to make FAST money in real estate? Listen... Read More

How to Attract Clients in Residential Real Estate

Doesn't it seem like everyone you know has a friend, relative, or acquaintance that is... Read More

How To Start Investing For Financial Independence, Part 2

Last week, we started a multi-part series about how to go from being a beginning... Read More

Property Investing

Wrapping a property is a simple concept that can create passive income for you and... Read More

FSBO - Selling Your Home FSBO (for sale by owner) ? Is It Worth It?

FSBO, what is it? FSBO means For Sale by Owner, and it's a term that's... Read More

Boston Real Estate ? You Still Have Considerable Control Over the Sale of Your Boston Home

Boston real estate is a hot topic. Daily newspaper articles comment on whether or not... Read More

How to Choose the Proper Entity for Your Business

First, let me state that I'm not an attorney and the rest of this article... Read More

Farm Expired Listings For Big Commissions

Many real estate agents begin and sometimes sadly end their careers without a plan. And... Read More

Buying Property In Spain

It's high time someone advocated the use of common sense and suggested that those people... Read More

Home Warranties: Are They Too Good To Be True?

What is a 'Home Warranty?'A home warranty is like an insurance policy. In fact, in... Read More

How to Eliminate Risk in Real Estate Investment

Avoid 12 Common Mistakes Made by Novice Investors and Ensure High Rates of Return!Real estate... Read More

New or Old House?

A lot of buyers think that a new house is the way to go but... Read More

Selling by Owner = Saving by Owner?

According to the National Association of Realtors, For Sale By Owner (FSBO) home sellers comprised... Read More

How to Own a Dream Home in Spain

Every year hundreds of thousands of foreign visitors travel to Spain to delight in the... Read More

Where To Start In Looking For A Central Illinois Realtor

Central Illinois is an excellent location for families and businesses. Property values and local economies... Read More

Investment Real Estate Made Easy ? Make the Most from Each Investment Dollar

When it comes to buying investment real estate, there are many schools of thought on... Read More

Get Rich With Mobile Homes

Does the myth that mobile homes depreciate in value keep you from investing in them?... Read More

Apartment Financing Explained

So you're interested in entering the world of property management? Have you thought about how... Read More

Tenants in Common (TIC)

Tenants in Common is a way of sharing ownership of property among two or more... Read More

Personal Debt Can Disappear When You Set up a New Business

I teach students how to set up a new business name on paper and then... Read More

Selling Investment Houses: Props & Profits

New Marketing and Design Psychology ideas help you stage homes for sale to motivate buyers... Read More

Real Estate Investing ? The First House Purchase

Real estate investing usually begins with the purchase of a house, rather than raw land... Read More

Are You Profiting From O.P.P.?

Are you profiting from O.P.P.? If not, why not? We know many of you have... Read More

Do You Speak Real Estate?

Anyone interested in real estate should be able to talk the talk. Here is a... Read More

How To Buy Property in Spain Safely

Buying property abroad is not an undertaking one should embark upon lightly! It is not... Read More

How to Use Design Psychology to Stage Your Home for a Top-Dollar Sale

A new business venture to help home sellers, home staging, assists property owners in preparing... Read More

Use Targeted Decorating To Get A Higher Price For Your House

This article will show you how to sell your home quicker, get a higher price... Read More

Reprint Rights and How To Use Them To Generate A Steady Income

I can't emphasize enough how important it is to have a step by step guide... Read More

Real Estate Investing - House Problems

Houses can have lots of problemsReal estate investing requires expertise in recognizing these problems and... Read More

Empty Nesters Flock To Inner City

Babyboomers whose children have left home, commonly known as "empty-nesters" are buying inner city apartments... Read More

Selling by Owner Escrow or Closing Checklist

Home sellers should keep on top of their pending sale; especially when selling without the... Read More

Top 7 Reasons Why FSBOs Fail To Sell Their Home On Their Own!

In the United States, less than 10% of all For Sale by Owners (FSBOs), are... Read More

First-time Home Buyers - 100% Home Loans

There is an increasing trend in South Africa that is seeing youths entering property market... Read More

Real Estate Investing: America Rents

Most people in America rent a personal dwelling!Just think how many families rent a house... Read More

Whats This about a Housing Bubble?

In his recent testimony, Alan Greenspan warned against the possiblity that we have seen home... Read More

Follow-Up - The Key To Successful Closings

If everyone always did everything they said they'd do, we'd all be a lot richer.... Read More

San Diego Real Estate, Million Dollar Homes

San Diego county has always been known for its Luxury Homes, yet in 2004 San... Read More

Canal Front Homes in Venice

A bit about VeniceVenice, Florida was named by an early explorer who thought the beautiful,... Read More

Sell your Property Faster

Learn how to sell your property faster and at the best possible price. Selling your... Read More

Small Town Stone House with a Long History

As a native Midwesterner, the first thing I noticed when moving to the Delaware Valley... Read More

Real Estate Investing - Maximum Leveraging of Your Money

At this moment, you have access to some amount of money, from the extremes of... Read More

Real Estate Appraisal - Do It Yourself

For single family homes, there are two basic methods used in real estate appraisal. They... Read More

How to Find and Buy a Bargain House with Little or No-Money Down

Real estate investors know how to make money buying distressed houses. Investors recognize that bargain... Read More

Selling Houses: Design Psychology Works!

I've taught the concepts of Design Psychology for many years, and I know how much... Read More

Investing in Real Estate Vehicle for Wealth Building

Real estate is one of the best vehicles of building wealth. Historically real estate has... Read More

Selling Your House Fast!

The physical senses of buyers respond to a home's design, and buyer base their purchase... Read More

Home Inspections or Home Warranty?

Homebuyers are a curious lot. They routinely ask thought-provoking questions. A common question is, "If... Read More

Selling Your Home ? Alone or with a Broker?

How do you decide whether to sell your home (or land, farm, ranch, etc.) on... Read More