Here’s our advice for picking the next affordable growth area to fit your budget.
The term gentrification essentially refers to what happens when higher income families move to a city or region that was previously at a lower socio-economic level.
When this happens, the area’s average income increases and more money is spent on improving the city as these higher net worth people spend money and make investments. As a result, property prices increase as well.
Gentrification is more common in middle and inner-city areas; however, it has occurred in smaller suburban areas outside of larger cities as well. Speaking to local real estate agents and doing some research will help you find the right cities for you, before they transform and while they are still affordable.
BUY IN SURROUNDING CITIES
Be sure not to discount cities which have already gone through gentrification and development. Their prices may have increased, but the opportunity hasn’t necessarily passed! Typically, growth happens in phases. While you may be late to arrive in one city, you might be just in time to purchase in the neighboring city or suburb while their prices are still low.
INFRASTURUCTURE IS AN INDICATOR
Beyond just trendy bars and cafes, new infrastructure projects can often be a precursor to property price increases; such as a new road system. Public transport developments may attract more buyers because the area is now more accessible, even to those far away.
New government initiatives like hospitals create job opportunity, and new residential developments bring new residents with more money to spend.
Researching infrastructure initiatives in your target area will give you a better look at where the city is headed in the next few years.
NEVER IGNORE SUPPLY AND DEMAND
Southern California and major cities along the West Coast have developed quickly, and consequently, are running out of land to build on. Despite a halt in construction, populations still tend to increase which drives up the demand for housing, as well as the price.
The key is to find an area where demand has yet to outweigh supply. Look closely at the particular area. If there is minimal or no vacant land left, it may be difficult to add supply in future. Then, have a look at population growth. As population grows, demand and pricing increase as well.
Despite major cities along the coastline being developed, Southern California has more land than it knows what to do with. Inland just a couple miles from the coastline are areas such as Irvine, with huge potential for development and a growing population.
Always pursue advice from a local real estate agent and do your own research, as forecasts and predictions are never perfect. Hopefully you are able to seek out the next growth hotspot and enjoy capital gains for many years ahead!