Nine pieces of wisdom for finding and investing in property hotspots

Here is a quick list of nine pieces of wisdom to guide your thinking as you seek a property investment. Property Observer has cherry-picked some bright ideas and insights from some long-time property players.

1. Pick gems before they have gotten their shine

John Edwards, the Residex forecaster, says the best investor returns are made when you buy at the right price, in the right place and at the right time.

Edwards stresses investors need to keep in mind that locations that already have a reputation for being a hotspot have most likely passed their invest-by date by the time you actually find out about them in the published hotspots lists. The Residex boss says a current “gem” is just that – current – and the opportunity to maximise returns has passed.

2. Pick investments with an element of scarcity

The WBP Property Group chief Greville Pabst suggests investments ought to have high land value and an element of scarcity. He gives an example of buying an apartment in a period-era block of flats in an established suburb, where there may only be half a dozen apartments built on valuable inner-city land, versus buying an apartment in the high-rise apartment precincts, and obvious building construction hotspots, where you are likely to be the owner of one of 100 similar apartments in the same development.

3. Look for nearby employment opportunities

Investors should look for nearby employment opportunities for tenants and/or owner-occupiers that are easily accessible, says PRDnationwide research director Aaron Maskrey. He says it’s essential for incoming residents to be able to source employment within the local region. Don’t just peruse the property websites, monitor the employment internet sites.

4. Don’t rely too much on population growth data; vacancy rates provide a better guide

An increasing population indicates work opportunities, investment in infrastructure and demand for housing, but according to buyers’ agent Catherine Cashmore, it does not always result in the best long-term capital growth.

Cashmore says it is always important to analyse the reasons behind any surge in population and conduct an assessment on the longevity of the move before committing to a purchase.  The approval of “mooted” residential developments is the first risk that must be evaluated to protect against periods of oversupply of any one type of accommodation, she says. Jobs are transitory and because workers choose only to rent, when the work dries up, the majority don’t hang around.

Cashmore says as a general rule investors should try and seek out those areas where turnover is low, with a good proportion of owner-occupiers to renters and a diverse range of accommodation. The 2011 census gives good insights.