Choosing the perfect location in which to purchase your investment property can be daunting. Depending on who you listen to, there are a variety of definitions as to what exactly a hot spot is. Given that there are so many great locations where you can buy property, a question I’m constantly asked is: “Where is the best place to invest?”.
Being able to predict the market is a skill. Unless you have a crystal ball, no one can predict with absolute certainty what the future will hold. The only thing you can do is to have an educated opinion. This is far better than guesswork or gut feeling.
Here are three examples of locations that are each considered current hot spots. A snapshot of what is happening in each area contributes to why the area is deemed a hot spot. By looking at these areas you can get a sense of what could work for you.
» Victoria: Epping/Craigieburn—precinct north of Melbourne. $2.2 billion upgrade to Western Ring Road; $670 million fruit &vegetable markets; $1.8 billion Aurora estate to be developed over 15-20 years. Government forecasts to 2021 suggest the Whittlesea LGA will have the fourth largest rise in population in Melbourne.
» Queensland: Springfield—western corridor Brisbane. Federal Government has already spent $3.1 billion on Ipswich Motorway Upgrade and the $1.5 billion rail link to the Springfield master planned community; $12 billion Springfield Lakes Community master plan is the brainchild of Maha Sinnathamby, a Malaysian Australian with a Tamil ancestry. The location, the corridor between Brisbane and the Gold Coast, is very attractive.
» NSW: Blacktown—west of Sydney and considered one of the fastest growing areas in NSW. With $1 billion in residential developments and $325 million hospital upgrade, Blacktown has emerged in recent years as Sydney’s most popular market for homebuyers and investors. It will also benefit from the Badgerys Creek airport.
“WHAT CONTRIBUTES TO A HOT SPOT?”
Let’s look at three common factors that contribute to an area becoming a hot spot and what drives property prices:
Scarcity: The price of a property is what people are willing to pay for it. The more scarce the availability of property, especially land close to the centre of a capital city, the higher the price will be.
Employment opportunities: Where there are natural employment opportunities, this is where most of the Australian population choose to live. People want to live close to where they work.
Infrastructure: Long-term infrastructure development is focused on transforming the appeal of a location by improving accessibility. This includes roads, rail links and river crossings, new motorway connections, upgraded train services, a new bridge or a tunnel. This leads to increased business activity and jobs, which creates demand for real estate, and therefore increases property values.
“HOW DO I CHOOSE WHAT IS RIGHT FOR US?”
Using the above three locations as examples, what is right for you depends on your long-term outcomes. The most common questions asked are: “Will the property grow in value?” “Will I be able to find tenants easily?” and “Will I be able to afford the property?”.
Will the property grow in value? If you want the capital growth then it makes sense to buy within
30 kilometres of a CBD because the land is scarce and as a result the property value must increase.
Will I be able to find tenants easily? Within 30 kilometres of a CBD there are usually around a million jobs and since not everyone will own their own property, there will be a strong rental market. If your investment property has a fair rent, then you won’t have to be concerned about your property being vacant.
Will I be able to afford it? If this is your first investment property then it may be wise to invest safely and make sure you don’t overstretch yourself. This is where you need to do some number crunching to compare what you can buy for your money. Make sure you compare apples with apples. If you are comparing four-bedroom house and land options the price will differ from Sydney to Melbourne to Brisbane. The good news is you have ample choice depending on your situation.
Many immigrants in Australians can become overwhelmed and quit before they even begin. The reality is that investing in property is relatively straightforward. The key is to conduct your due diligence and to continue to learn about the industry.
My recommendation is not to focus too much on looking for hot spots, because within the hotspots there are always cold spots. Consider the spots where the masses are not flocking to, hence the prices are relatively low and there is great deal of room to grow. Make sure you choose wisely.
The writer is the founder of IPNA—Investment Property for New Australians. He was born in Sri Lanka and is a best selling co-author of three business books
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