What are property heatmaps?
Property heatmaps is a top-view map of an area showing segments of suburbs, with coloured overlays. These coloured overlays can vary in intensity and radius, depending on the criteria. For example, this map below from CoreLogic’s ‘Mapping the Market’ tool shows us the suburb median property values in Melbourne:
The colour gets darker or more intense as we get closer to the CBD of Melbourne, as (generally speaking) the closer you get to the city – the higher the property prices.
Heatmaps are generally built on median house price, but there are heatmaps that are available for a range of socioeconomic indicators such as rental income, vacancy rates, public transport availability and more.
In fact, we’ve even found a source that heatmaps ‘hipness factor’ in Sydney (believe it or not!). However this ‘factor’ would most likely be more interesting to people looking to live in the area, as opposed to purchasing an investment property!!
Why would you use property heatmaps?
Using property heatmaps can be helpful in that they show us suburbs that have grown in median price recently. While you wouldn’t then purchase in a ‘hotspot’ as it is likely that the demand in these areas is high and properties will be overpriced. Instead we can use the ‘hotspots’ on a property heatmap to give us an indication on which are the neighbouring suburbs that have the potential to grow as a result.
This is certainly important data to consider when looking to invest in property, however it is dangerous to rely on this alone to guide our investment decisions.
A property heatmap example
In line with the image above of Melbourne, property heatmaps tend to show the most intensity at the centre of a capital city, then gradually fading out as we move further out into suburbia and beyond. However, comparing heatmaps from different years, we can also see the inner-most intense area tends to grow in size over time, visually showing us when natural metropolitan sprawl is occurring.
When metropolitan sprawl continues, it can often run into an already established regional town. These regional towns then become an outer suburb of the original metropolitan area. For example, Melton in Victoria:
Melton was previously considered to be a small town, before being declared a ‘satellite city’ to Melbourne in 1974. But now with the continual urban sprawl, it is classified as an urban area within metropolitan Melbourne. Subsequently, Melton has experienced median growth of 28.21% over the last 12 months, which is excellent in comparison to the national average of 4.2% (according to CoreLogic).
However, just because Melton was a great place to invest (if you got in before it boomed), does not always mean that the neighbouring suburb of Bacchus Marsh is automatically a sustainable location for your next investment property. The question needs to be asked: What is going to support the continual growth within Melton itself, and the surrounding areas?
Why you should stop relying only on property heatmaps
Hotspots on property heatmaps don’t always equal sustainable property hotspots that make for sensible property investing.
Sure, property heatmaps give us an indication of suburbs that have the potential to grow – but once that initial growth has curved, what is in place to support the continual and sustainable growth within a suburb?
Instead, you should be considering a range of different indicators like we do in our Property Analysis Matrix – such as what education and employment opportunities there are in the area to be drawing potential tenants in, and keeping them there.
If you’d like to talk more about some of the property indicators that we use at Equidel to assess investment properties around the country, just get in touch. We like to start with coffee, and we can either assess properties you are already considering, or can help you source suitable properties for you to invest in.