What is a "Hotspot"?
A common “buzzword” in real estate, hotspots are areas where property values are predicted to next experience significant capital growth. While it is impossible to pinpoint exactly where and by how much the increase will be, there are some key indicators that investors or real estate savvy home buyers should look out for. Keep in mind that if it is already being called a “Hotspot” in the media you might be a little late for the best capital growth as prices would have already started increasing!
So what are some key indicators?
- Are neighbouring areas currently experiencing good capital growth? What is known as the “ripple effect”, buyers tend to move a suburb further out than where they would like to live when they are struggling to find or afford a property in their chosen suburb. This causes a ripple like effect to pricing in a circumference out from that neighbourhood.
- Are prices lower in the suburb compared to other surrounding suburbs? Make sure you check that there is no obvious reason for the more affordable prices eg. New industrial development under construction.
- Is demand starting to exceed the supply and are “days on market” becoming shorter?Are you starting to see properties just listed for sale selling straight away or find out all offers on the properties for sale are becoming multiple offer situations.
- Are there positive developments happening in the area? Proposed transport developments often increase prices. Will it be quicker to get to the CBD? Are there road transport links or new ferry terminals under construction? Other positive developments can be new shopping precincts or schools undergoing improvements to their facilities.
- Are there a lot of older run down properties undergoing renovations, increasing the calibre of the housing in the area? We are not talking just one or two homes in a whole suburb. I’m sure everyone has heard the adage “buy the worst home in the best street” When you can start to see a trend of general improvement in the area and you are not scared to do some basic renovations, this can be the best way to achieve fantastic capital growth from your initial outlay.
Finding the next “Hotspot” location is only one thing to keep in mind if you are looking to use real estate investment for good capital growth or some quick cash “flipping” property. Don’t forget to do research around what style of home or configuration is in demand in the general location, and don’t get carried away on your speculating and pay too much! If you can see there will be significant renovations required, make sure you have a Building & Pest inspection, and it may be a good idea to get a quote of the work required to make sure you will not be overcapitalising once the work is complete.