Tuesday, October 27, 2015 / Property Investment
They are all losses that have been made in areas that were largely speculative, such as a mining town.
If you take for example the surge in investment that occurred at Roxby Downs in South Australia whilst there were large scale talks about making the Olympic Damn mine open cut and therefore needing to massively increase their workforce.
The thing is, when the plan to make Olympic Damn open cut was shelved, this left a devastating situation for the investors who had purchased over priced property with the intentions of collecting the much higher rental yield that can be expected in a mining town.
Now there are probably quite a lot of investors who still managed to sell early enough to count their transactions in the mining area as a victory, however there are certainly plenty of investors who lost out.
The problem comes from the fact that this type of speculative investing is relying on only one variable in order to allow for the growth of the area. This variable being the fact that it is in an area well suited to accommodating workers from a local mine.
People can get over excited with the rental yields and vacancy rates in the early stages of a mine being built, which often doesn’t account for the fact that during the construction phase there are a lot more workers in the region than there will be during the operational phase of the mine. A simple oversight, yet it should be avoidable with the right strategy.
Having a well researched strategy that identifies an area that is gaining in value for multiple reasons, not just the location of a single industry; is the safest way of ensuring that your investment will be a fruitful endeavour.
When you research suburbs that are in larger metropolitan or inner suburban areas, then you see that they are not reliant on any one single factor to drive their value up.