{"id":2367,"date":"2022-04-16T04:24:14","date_gmt":"2022-04-16T04:24:14","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/looking-for-the-next-property-hotspots-in-australia\/"},"modified":"2022-04-16T04:24:14","modified_gmt":"2022-04-16T04:24:14","slug":"looking-for-the-next-property-hotspots-in-australia","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/looking-for-the-next-property-hotspots-in-australia\/","title":{"rendered":"Looking For the Next Property Hotspots in Australia"},"content":{"rendered":"

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After all these years in property I\u2019m still surprised at how investors decide which property to buy<\/a>, but it doesn\u2019t surprise me why so many don\u2019t get past their first or second property.<\/p>\n

You see\u2026 many buy for emotional reasons and while others think they\u2019re investing in property, for some they\u2019re really speculating.\u00a0\"house<\/p>\n

By definition, speculation is:<\/p>\n

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The practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value rather than attempting to profit from the underlying financial attributes embodied in the instrument<\/i>.<\/p>\n<\/blockquote>\n

But so often I hear people who think that they are investing say things like:<\/p>\n

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I know this area has had poor capital growth in the past, but it\u2019s about to take off.<\/i><\/p>\n<\/blockquote>\n

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I\u2019ve bought a report \u2013 I know this is the next hotspot.<\/i><\/p>\n<\/blockquote>\n

I can understand why, in an attempt to outperform the market, people wonder where the next hotspot is going to be.<\/p>\n

But when they ask my opinion they\u2019re usually disappointed that firstly I don\u2019t know, and secondly that I don\u2019t really care.<\/p>\n

What is hot spotting in real estate?<\/h2>\n

I\u2019m not in the business of speculating. <\/strong>Instead, I make my investment decisions based on proven long-term performance, rather than short-term speculation.<\/p>\n

The fact is hot spotting \u2013 seeking out the \u201cnext big boom\u201d location \u2013 is speculation and not true property investment.<\/p>\n

If you look at the track record of people chasing the next trend it\u2019s been pretty poor.<\/p>\n

On the other hand to \u201cinvest\u201d in property requires the intention of generating\u00a0long-term capital growth that tracks above average,\u00a0long-term price growth for the area.<\/p>\n

Looking for the next property hotspots<\/h2>\n

Many of the hotspots predicted by some of Australia\u2019s property analysts turned out to be correct.<\/p>\n

Some of the regional areas and mining towns boomed, at least for a while as investors chased up prices, but unless they got the timing right, chasing the next hotspot turned out disastrous for many investors.<\/p>\n

Some are left with properties worth considerably less than they paid and with less rental income than they expected.<\/p>\n

They are now unable to sell their properties as buyers have abandoned these markets, which have little depth from local demand.<\/p>\n

If you\u2019re into investing in short-term trends, being right isn\u2019t what\u2019s important. It\u2019s being right at the right time that counts.<\/strong><\/p>\n

Very few can do that, so the history of investors trying to find the next boomtown is littered with people who get the story right and the outcome wrong.<\/p>\n

Instead, I buy in areas that have a proven long-term history of outperforming the average capital growth and that are likely to continue to outperform, because of the demographics of the people living in the area.<\/p>\n

5 downsides of property investment hotspots<\/h2>\n

Hot spotting is virtually the opposite of this sensible, not-so-sexy, tried and tested system for successfully building a property portfolio<\/a>.<\/p>\n

1. It is about short-term speculation<\/h3>\n

The key to building a substantial property portfolio is to use your first property to leverage into your next property and then using those two properties to leverage into more investments and so on.<\/p>\n

You will only have the ability to do this if you invest in locations that consistently provide long-term capital growth.<\/p>\n

By definition, \u2018hotspots\u2019 are not these types of areas.<\/p>\n

Just as quickly as they heat up, property values in these locations can come off the boil and cool very quickly.<\/p>\n

Look what happened to many mining towns and sea change locations around Australia.<\/p>\n

2. It often means following the crowd<\/h3>\n

Many people trying to buy in the next hotspot get their advice from online reports or \u201cget rich quick\u201d seminars, and in the short-term some of these predictions are self-fulfilling.<\/p>\n

If you suddenly get a diverse group of investors buying up in a small town that has little market depth, this tends to push up prices, \u201cproving\u201d this area really is a hotspot.<\/p>\n

What\u2019s really happening is that you\u2019re seeing an over-inflated market that, more often than not, is unsustainable in the long term.<\/p>\n

Some of our mining towns, the Gold Cost and the Sunshine Coast are great examples of this phenomenon.<\/p>\n

On the other hand, strategic investors buy counter cyclically, when others are afraid to get into the market.\"property<\/p>\n

3. It requires accurate timing<\/h3>\n

Most investors don\u2019t have the necessary knowledge to know when it\u2019s the best time to buy.<\/p>\n

Sure, certain hotspots have excellent potential to generate long-term capital growth, but these are rare.<\/p>\n

For example, there\u2019s the inner-city suburb that\u2019s yet to take off because while it\u2019s on the verge of gentrification, it still has an air of industrialisation.<\/p>\n

Some investors can pick these areas before the market takes off, but timing markets like this is difficult.<\/p>\n

The real problem is that by the time you find out about the next hotspot, it may be too late to benefit from that substantial early growth.<\/strong><\/p>\n

Or the opposite could be true\u2026.<\/p>\n

You might end up jumping in too early and not reaping the rewards for many years while in the meantime, your money has been tied up and you\u2019ve missed out on real opportunities in proven areas.<\/p>\n

4. It is usually based on opinions rather than facts<\/h3>\n

When you read articles in the media or hear reports on TV that suggest an area is about to take off as the \u201cnext big thing\u201d, in reality you\u2019re simply just being given someone\u2019s opinion.<\/p>\n

Be careful and ask yourself, are they biased because they have properties to sell and it suits them to be spruiking a certain area?<\/p>\n

You\u2019re better off to rely on your own research and due diligence, rather than blindly accepting a so-called expert\u2019s potentially biased advice.\"property<\/p>\n

5. It can generate short-term inflation<\/h3>\n

Especially, if we consider suburbs that can\u2019t sustain a high level of price growth over the long term. Today\u2019s hotspot could be tomorrow\u2019s over heated market.<\/p>\n

For example, when the resources boom hit Western Australia and far north Queensland, thousands of investors jumped on the bandwagon and bought into the mining towns that sprung up overnight and became a buzz of activity.<\/p>\n

But now that the resources sector has cooled off, many of these towns have gone from boom to bust, as the major industry supporting the local economy came crashing down.<\/p>\n

I know of many investors who are still having trouble offloading their under performing properties in these mining towns and regional centres, which were previously called hotspots.<\/p>\n

My suggestion is to avoid the excitement of hotspots and follow an investment strategy that allows you to survive changes in the market, without taking big losses.<\/p>\n