Today’s hot spots are great spots to invest in. About 5 years ago…
The key is to invest in tomorrow's hot spots today!
When a place has been touted in the media as a hot spot, it generally has already had phenomenal double digit growth and or rental returns over the past 12-36 months if not longer. Property does not go up in a linear fashion, it has growth spurts then it tapers off until the start of the next cycle. That is why we generally steer clear of today’s hot spots as they’re less likely to have room for growth as opposed to places that are NEIGHBOURING such hot spots but have yet to enjoy the growth spurt.
Growth begets growth and as one suburb becomes hot, then it will spread as more of the buying market is priced out and must settle for the next best thing. Take Sydney’s Zetland for example, a favourite hot spot for many investors who have done extremely well if they had purchase 5 – 10 years ago. Prospects are still good if they bought in there now, but it won’t be as good as if they invested in neighbouring Waterloo or Botany at much lower price points.
Same with Rhodes in the Inner West, very attractive suburb with a lot of growth over the past 5 – 10 years, but the smart money would be on neighbouring Wentworth Point with price differences of up to $100,000 a mere water way apart. And now there’s going to be a bridge put in to join the two, accelerating the price growth in the hot spot’s little sibling.
At the end of the day, you must evaluate the purchase price and make sure that it has headroom for growth within a timeframe that suits your goals. If you need to realize growth in the more medium term, then hot spots are not for you. If you want the security of a recognized hot spot, can afford the asking price and don’t mind waiting over a longer time frame to see more growth, then by all means go right ahead.
No matter what property investment advice that you’re given, you must put it into perspective and alignment of your own risk profile and ultimate investment goals.