Does Population Income Have Anything to do with Growth and Crime Rate?

OK, another data analysis. This time I want to prove if income of the population determines the growth of the suburb. As you realise, people with higher income obviously live in these so-called “A-Grade” suburbs. So I really want to prove if their income determines growth.

Also, I would like to check if higher-income suburbs have less or more crime rate as this will determine how much headache I might have should I rent my property out in these suburbs.

This is how I carried out the analysis:

• I took 10 Posh Suburbs, 10 Medium Class Suburbs and 10 Low Class Suburbs
• I took the crime rate of each of the suburbs above and divide by the number of population
• I took the growth percentage of each of the suburbs above for 1, 5, 10 and 15 years

Below is my findings:

 

Easy Buyer’s Agent Analysis

When we’re talking about growth, I don’t think income has a direct effect per-se. Obviously income indicates the type of people living in those particular suburbs. However, I believe the growth itself is actually influenced by the qualities of the suburbs more than just the population’s income itself. The higher the income, the more they can afford living in these nice suburbs ie. A-Grade suburbs where they are closer to CBD and water.

For short term (1-5 years), these A-Grade suburbs grow better than the Medium-Low counterparts. However, I definitely strongly advise not to gamble in this market. The reason is, you have to time the market correctly. Otherwise, you might be holding a very expensive property. If you have so much cash which you can reduce your LVR to let’s say 50%, then it’s a different story. Otherwise, for the most of us with standard wage, you’ll be looking for financial suicide.

In these Posh suburbs however, the crime rate is very-very low. So, if you live there or own an investment house there, then be at peace knowing that your property won’t be ransacked. Having said that though, rich people often have their own eccentricity. 

For Medium-Low class suburbs, as you can expect, crime rate is higher. These are the suburbs where mid-class working people are located. For short term growth, these suburbs are not as good as the Posh ones. However, for long term (15 Years+), they actually grow the same if not more than the Posh!

So, as a conclusion, if I would to invest, I would buy in Medium-Low suburbs. That’s for sure! Not only are they cheap, long term it looks like they produce the same amount of growth, if not more. I myself will not buy an investment property for more than $500,000 – or around thereabout. With these sort of investment grade properties, I can definitely achieve positive cashflow, or even positive gearing.

Buying in the Posh suburbs are very risky. While they provide short term growth, however holding cost is way too expensive. It’s a gambling exercise in my opinion. If you’re looking for a place to live in, then fair enough. I would definitely want to live in a safe and nice suburb. Having said that, buy only what you can afford!