Listen as our AI podcasters discuss the importance of rank-ordering potential locations for SDA Housing based on their relative demand to supply.
Key Takeaways
- Quickly Identify Opportunities: Use the Demand-to-Supply Ratio (DSR) to pinpoint regions with undersupplied Specialist Disability Accomodation (SDA) housing markets for maximum returns.
- Save Time and Effort: Narrow your focus to the top-performing regions, avoiding the overwhelming task of analysing the entire market.
- Minimise Risk: Steer clear of oversupplied markets and focus on balanced or undersupplied areas to secure stable and lucrative SDA property investments.
- Rank and Prioritise: The DSR enables you to rank regions and prioritise investment decisions based on clear, actionable data.
- Start Smart, Research Deep: The DSR is your starting point, guiding you to regions that stand out, so you can spend time on deeper analysis where it matters most.
Specialist Disability Accommodation (SDA) is one of the most promising sectors in property investment, offering not only financial returns but also the opportunity to make a meaningful social impact. However, beneath this potential lies a complex web of demand mismatches, oversupply risks, and policy-driven changes.
For investors, the critical question is: Where should I invest, and which SDA property type should I focus on?
The answer lies in a powerful metric—the Demand-to-Supply Ratio (DSR). This ratio simplifies vast amounts of data into a single, actionable insight, highlighting regions and property types with the highest potential for returns.
In this guide, we’ll analyse the September 2024 SDA data for the regions of Victoria North West and Melbourne North East. In essence, once you know the ratio of demand to supply for SDA housing, it’s quite simple to pick an area with the highest DSR.
Let’s dig deeper and see how this works.
When it comes to investing in Specialist Disability Accommodation (SDA), understanding the Demand-to-Supply Ratio (DSR) is critical. The DSR isn't just another number—it's a strategic metric that allows investors to identify areas of opportunity and risk.
In this guide, we'll show you how to use the DSR to:
- Identify regions that are undersupplied, balanced, or oversupplied.
- Rank and prioritise the best investment opportunities based on market dynamics.
The SDA Demand-to-Supply Ratio is calculated as follows:
Steps for Calculation:
- Determine the Demand: Count the total number of SDA participants in the region or category being analysed. This data is typically sourced from government and SDA Data regional location reports.
- Determine the Supply: Count the total number of compliant SDA dwellings available in that region or category.
- Apply the Formula: Divide the demand by the supply.
- A ratio greater than 1 indicates undersupply (i.e., demand exceeds supply).
- A ratio less than 1 suggests oversupply (i.e., supply exceeds demand).
- A ratio equal to 1 reflects a balanced market.
Example:
If there are 200 participants in need of SDA dwellings in a region, but only 100 such dwellings are available:
This means there are 2 participants for every available dwelling, indicating a strong undersupply.
Taking this further, if we had two locations where demand exceeds supply, which location would you choose?
This is where the power of the SDA DSR becomes apparent.
Let's say we have two areas of interest:
- Location A with a DSR of 2.0
- Location B with a DSR of 2.5
Both areas are undersupplied. So which area do you pick to start your deep-dive research?
Location B is the better location based on the fact that the ratio of demand to supply is higher than Location A. Simply put, there are proportionately more participants for each available SDA home in Location B than in A. They are both very good locations but, initially, Location B is better based on the SDA DSR.
To further simplify this analysis, I've labeled each area below as either oversupplied, balanced or undersupplied based on their DSR:
- A ratio greater than 1 indicates undersupply (i.e. demand exceeds supply).
- A ratio less than 1 suggests oversupply (i.e.supply exceeds demand).
- A ratio equal to 1 reflects a balanced market.
The table below summarises the demand-to-supply ratios (DSR) for the key SA3 areas in the two reports so we can quickly determine their supply-demand status.
SDA Demand-to-Supply Ratio by SA3 Region (All Categories) - Sept 2024
Table illustrating the Demand to Supply Ratio (DSR) for SDA housing in Melbourne NE and Victoria Northwest. Which SA3 area would you pick for further research? Source NDIA and SDA Data | Sept 2024
Please be careful...
Some of my readers might think Nillumbik-Kinglake is the area to invest in due to having the highest DSR of all SA3 locations in the two regions compared here.
There are multiple other factors to consider including the demand and supply by design category (high physical support, Robust, IL etc) , by property type (units, houses, villa's etc).
Our reports go into much more detail: view a sample detailed supply-demand location report or buy a report here
Conclusion
The DSR is your key to unlocking the best SDA investment opportunities. By identifying undersupplied regions and ranking markets by their DSR, you can maximise returns and reduce risk, ensuring your investments are both profitable and impactful.