Many property investors make the common mistake of investing in properties close to home. In fact, studies show that two-thirds of property investors choose to buy in their own geographical area, a decision that often limits their potential for long-term financial success.

The Realities of Property Investment in Australia

Despite the growing number of property investors in Australia—estimated at 2.1 million—the majority do not achieve the financial freedom they seek. In fact, 1.9 million investors never move beyond their first or second property, while only a small group of around 20,000 investors own six or more properties.

A report conducted by Dr. Maria Yanotti, an economics lecturer at the University of Tasmania, and Danika Wright, a finance lecturer at the University of Sydney, examined the behaviours of Australian property investors. Their research revealed that two-thirds of investors choose to buy property within their local area, often due to a sense of familiarity, rather than exploring regions that may offer greater potential for growth.

Dr. Yanotti attributes this phenomenon to what is known as the “familiarity bias.” Investors tend to gravitate towards areas they know well, believing that proximity provides an advantage in terms of market knowledge. However, the study found no evidence to support the idea that being familiar with an area gives buyers a distinct information advantage.

The Difference Between Local Knowledge and Market Expertise

As I’ve often stated, knowing your local neighbourhood does not equate to understanding the broader dynamics of property markets. Successful property investment requires a deep understanding of what makes a property a good investment—not just local familiarity. While being close to your investment may seem convenient and reduce time and effort, becoming a successful investor demands extensive research and analysis—often beyond what you can accomplish with just local knowledge.

This is why many seasoned investors are turning to buyers’ agents, professionals who possess comprehensive market knowledge across multiple regions. Buyers’ agents can identify high-potential areas that investors may not have considered, expanding their investment horizons and increasing the likelihood of a profitable outcome.

The Dangers of Self-Managing and Local Overconfidence

Another concerning statistic from the research highlights that one-fifth of investors are self-managing their properties. This is a risky practice, as managing investment properties requires expertise and time—a commitment that many investors may not have the resources to handle effectively. Hiring a professional property manager is not an unnecessary expense, but rather a smart investment. A qualified property manager provides an essential safety net, ensuring the protection of your asset and optimal property performance.

Dr. Yanotti points out that while local investors may feel confident in their area, consolidating all assets in a single location can dramatically increase exposure to risk. “Housing assets are among the largest financial assets an individual can hold,” she said. “By having all your assets concentrated in one geographical area, the risks associated with market fluctuations are much higher.”

Moreover, the study found that investors who buy locally often end up paying higher prices for properties in the same postcode. Dr. Yanotti was surprised to discover that these investors often overpay, despite not necessarily securing better-quality properties. She suggests that this is due to overconfidence in their local area, leading to the phenomenon known as home bias, where familiarity clouds judgment and prevents investors from making more informed decisions.

Expanding Horizons for Smarter Investment

Ultimately, the key takeaway for property investors is this: while investing close to home may feel safer, it can limit both financial growth and risk diversification. To succeed, investors should broaden their perspective and consider opportunities outside of their immediate area. With the guidance of a skilled buyers’ agent and a better understanding of broader market trends, you can ensure that your investment strategy is as robust and profitable as possible