How to choose where to buy or invest in.

Understanding the Consumer Psychology Behind Suburb Demand

When it comes to purchasing a property, one of the most important factors to learn is how to choose where to buy and which suburb is best suited for me. But what makes for a good suburb? And why do people choose one over another? In this article, we’ll explore the factors that influence home buyers and investors when choosing a suburb, and the psychological drivers that inform their decisions.

For home buyers, location is often the most important consideration. They may prioritize proximity to schools, public transportation, parks, and other amenities that are important to their daily lives. Other factors that may be considered include safety, walkability, and access to shopping and dining options.

Investors, on the other hand, may be motivated by different criteria, such as the potential for rental income or future capital growth. They may be looking for properties in areas with a strong rental market, or in neighbourhoods that are experiencing gentrification and are likely to see property values increase over time.

Home Buyers 

In both cases, when either buying to live in a property or to invest in property, people are first governed by affordability, thereafter comes suitability. Simply put, we can only buy what we can afford. Once we have narrowed down the areas that do suit our own pocket, then we start applying our ‘psychological filters’ for narrowing down the options. 

How to choose where to buy is often determined by a good suburbs proximity to work or easy access to freeways, trains, and buses. Also, social and community activities and amenities like schools, daycares, gyms, medical facilities, and supermarkets

The demographics of an area are typically also an important psychological factor for investors when making a residential buying decision. Buyers may look at the ethnicity or the multicultural aspect of the suburb. Sometimes an area close to family or relatives is prioritised. 

Two psychological criteria high up on the list of area selections are whether the area is considered safe and also whether there is  peace and quiet, i.e. is the suburb away from busy highways and major intersections.

The life-stage of the buyer further plays a role, e.g. young couples and growing families are often looking for newer, developing suburbs with a more modern flavour and feel. Whereas midlifers and retirees might again opt for the more entrenched suburbs. 

Sometimes  interests or hobbies factor into the decision, for instance when people want to live in the mountains or near the sea and beaches to access a certain lifestyle, e.g. hiking or water sports enthusiasts.

Apartment Buyers 

What makes certain suburbs more desirable for apartment buyers? In a nutshell, the main reasons people buy apartments are usually because they are convenient and easy to get to.

Whether a particular apartment is located within walking distance to amenities and public transport like railways and trams, dining establishments, bar precincts, malls, shopping, nightlife, and entertainment is often the dealbreaker.

Apartment purchasers often also like to know if there are property management services in the area. If one day they perhaps choose to move out of their own apartment but still keep it as an investment, then they want to rest assured that property professionals are available to look after it on their behalf.

How to choose where to buy new apartments indicates better capital returns, measured over 10 years, for apartments closer to major city centres or central regional hubs.

Pure Investors

How to choose where to buy as an investor is most interested in gaining an acceptable return on their property investments. Typically, they do not wish to live on the property or use it for their own purposes. They see the property market as a mere investment class—other classes are shares, bonds, commodities, etc.—and as a vehicle to make their money work for them.

The key psychological driver for a pure property investor is to find an area or suburb that will yield the surest and/or best return over the desired investment period. They want to achieve a market-related ROI and feel comfortable that their money is safe. Other factors often do not even come into play for pure investors. 

Property investors are mostly interested in the hard facts associated with specific areas. Websites like Domain provide detailed market reports for suburbs and provide median prices, rental rates, and population demographics that they are looking for when making their purchasing decisions.

Smart investors typically also evaluate the  future outlook and potential of an area, like imminent rezoning and improved  infrastructure changes or a potential influx of students or immigrants creating higher demand for rental accommodation. All of which often has the knock-on effect of increasing rental yields and property values.

Why Invest in Property?

There are many reasons to own property. Firstly, of course, we all need a place to call home, isn’t it? And it’s undoubtedly much better to pay off an asset that will one day be yours instead of just making a landlord ‘rich’!

Another significant reason for investing in property is its growth in value.For instance, using Australia as an example, property prices have grown on average at around 11 % per annum since 1926.

What’s more, property is an asset that can be borrowed against in times of need. Also, as the  owner, you have direct control over the property, which can be willed to family or friends in your estate planning.

In Conclusion

Different people have different reasons for making a property purchase. The market is mostly made up of people who need a place to live and people who only use the market as a way to make money.

In the preceding paragraphs, we have demonstrated what the key psychological drivers are for both categories of purchasers, i.e., access, demographics, and convenience for home buyers, and investment yield / sustainability for pure investors.

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