July 05, 2016
If you’re thinking about building up an investment portfolio or purchasing a home, it is useful to know how to identify the next property hotspot or growth area.
Buying in a growth area before it takes off may see the value of your property increase a lot faster, but it is also important to know how to identify real growth as opposed to a short-term boom. Before we look at how to identify a growth area, let’s look at what a property hotspot is.
Definition of a property hotspot
When those in the industry or media refer to a ‘hotspot’, they are usually talking about suburbs that have typically underperformed.
So what’s so ‘hot’ about that? Often it’s the suburbs that have been flying under the radar or a little rough around the edges that create the best returns for buyers. This is due to a range of factors, such as growth, development and proximity to other booming suburbs.
So how can you spot a growth area?
Research is the key to getting into an up-and-coming area ahead of the pack. The following signs indicate that a suburb is primed for growth.
Gentrification occurs when once undesirable suburbs experience an influx of new, often younger, residents. These inhabitants tend to bring wealth, jobs and new development – all of which can result in an increase in property values over time.
In Brisbane, think of suburbs like Woolloongabba, Fortitude Valley and West End as prime examples of gentrification. Once industrial, run down or undesirable areas, they are now some of the most in-demand inner-city suburbs.
- Signs that a suburb may be on the move include new cafes, shops or unit developments.
- Remember to think long term, as these transformations can sometimes take 10–20 years.
Pay attention to infrastructure announcements in your city, as the developers behind these projects will have done extensive research into the area and its potential. Keep an eye out for announcements relating to:
• Transport – new train lines, airports and roads
• Health – new hospitals or research facilities
• Education – new universities, campuses and schools
• Retail – major supermarket chains or other large retailers
Major developments like these create employment opportunities, attract new people to the area and are a sign of growth to come.
- Research development announcements on your local council or state government website.
- Look for properties with close access to public transport and other amenities.
The ripple effect
Most property booms tend to start with popular inner-city suburbs, where housing can quickly become unaffordable. In this situation, seasoned investors start looking towards surrounding suburbs that are still within close proximity of the CBD. If the timing is right, you can find a more affordable property before the ripple effect of increased prices takes hold.
- Know what phase of the property cycle the area is in, and remember that this may vary from suburb to suburb. The property cycle will also dictate how big your return on investment is likely to be and how long it will be before you get there.
- Regularly monitor median prices on a quarterly basis and look at how quickly property is being sold. Speak to real estate agents or use tools such as realestate.com.au’s investor portal.
- If there is a lot of construction happening, be wary of oversupply.
When looking for the next property hotspot, it’s important to understand that growth depends on a variety of different factors and some areas may experience short-term booms. With the right research, you will begin to notice trends in the way the market shifts and become better at identifying its growth potential.
Be ready to make an offer
Properties in hotspots are often snapped up quickly, so make sure you are pre-approved before you start house hunting. This will mean you can swoop in and make an offer as soon as you find the ideal property.
If you are ready to buy in a hotspot, speak to me about getting pre-approval so you can start making offers.
Luke Cashin > 0419 733 862
Your Garden City Mortgage Broker, Brisbane