The Ripple Effect on Property Prices

The ripple effect in property is something I have spoken about in the past and is referred to in a recent article by Terry Ryder in Property Observer:

My interpretation of this phenomenon is that when demand for property outstrips supply we see property prices rise in a given area. As generally buyers have a budget they are restricted to, this budget restriction results in some buyers being forced out of their original target suburb as prices rise. Usually buyers want to stay close to their original target suburb so they move to the next suburb they can afford as a compromise. This trend continues, pushing up prices in the adjacent suburb moving buyers that had originally targeted the adjacent suburb as their primary suburb on again to target the subsequent adjacent suburb based on affordability. This ripple trend continues even on out to the regional cities as prospective buyers weigh up price discrepancies across towns and cities and begin to make lifestyle choices.

As a property investor it may be possible to take advantage of this trend and target suburbs likely to benefit in the near future of this ripple effect. For example if you identified a suburb that has not yet shown any significant price movement and yet the adjacent suburb has already shown strong growth this might well be worthy of further investigation as it could be a pointer to

impending capital growth.