My thoughts on property hotspots – Michael Matusik

I don’t like the term hotspots.

For mine, it doesn’t really ring true when it comes to property.

There are very few instances in which investment ‘heat’ is induced to a very specific location or property type.

Residential property investment is a long-term hold.

The statistics show that most buyers make more money on resale, the longer they hold the property.  The cost of buying & selling property, coupled with our current tax system, makes short-term property holds quite expensive; often cost prohibitive.

Those who try to ‘hotspot’ often miss the mark.

Many are, for mine, speculators – not property investors.

This is fine.

It is just that most investors don’t have the time or experience to sufficiently profit from property speculation.  For those who do – then, good luck to you.

For us mere mortals, I think it is more important to consider property investment from a wider point of view first.

Most readers should considering buying an investment property in locations with:

•      Established population base – say over 100,000 permanent residents plus population growth/increasing household formation

•      Consistent rental returns, typically over 5% or $1 in rent for every $1,000 spent

•      Improving employment prospects – 5+ pillars of economic growth

•      Rising incomes – ability to upgrade locally

•      Increasing home renovation activity – shows local owner reinvestment, which means more owner-residents

Often, how an investor actually structures their investment – owner-identity/gearing/depreciation etc – has as much bearing on the outcome as does the property’s location; product type or even purchase price/initial rental return.

There is little doubt that property cycles.

Many markets across the country are in a recovery phase of the property cycle.

Broad factors drive the property market.

These are not location or even product specific.

These factors include:  liquidity; employment; confidence; broad investment returns; overall demand; scarcity & plain human nature (“yes” or “no”).

Hot spot #1

Also, within the broad property cycle – a property clock (for sake of easy description) also operates – in which certain locations & even property types are positioned at difference phases of the cycle/clock.

For example, capitals well positioned for 2014 include:

  • Perth
  • Sydney
  • Melbourne
  • Brisbane

Hot spot #4

Within Queensland, the better-positioned markets include:

  • Townsville
  • Sunshine Coast
  • Toowoomba
  • Rockhampton
  • Cairns
  • Gold Coast
  • Ipswich

Hot spot #3

I think it is best to discuss property in these terms rather than trying to elevate a location’s investment potential based on, more often than not, a once off set of circumstances or events.

And, as we have previously outlined, also very important is what type of property you buy.

We have been back at it for almost a week & already we have had more requests for us to nominate this year’s hotspots than we did for the whole of last year.

2013, I think, could have been labelled as the “big nothing” – a year when really not much happened (outside of Sydney) despite calls of property Armageddon.

2014 is already shaping up as the year of the property spruik.

“What’s hot” is likely to be this year’s catch cry.

I am already starting to reply “Not as much as you might think”.

Two weeks into the year and already I am a cynic.

Or to quote Dylan:

“In a soldier’s stance, I aimed my hand – At the mongrel dogs who teach – Fearing not that I’d become my enemy – In the instant that I preach”

OPINION is, well…just that – our opinion, nothing more, nothing less.  It is a far cry from the final word on the topic; but if it engenders your interest and maybe some debate, then our job is done.

[post_ender]
 



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Michael Matusik

About

Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


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