Hotspotting: An investment strategy or speculation?

By the resi financial blog team, 04 September 2013

Hotspotting: An investment strategy or speculation?

As a property investor, you'll want to ensure that you are placing your hard-earned funds into a dwelling that is secure and generates a positive return on investment.

To be sure that people are making wise investment decisions, they can often flock to buying into 'hotspot' areas.

Property hotspots are pinpointed areas that have a high population rate, and where the level of building construction is trending upwards. 

This often means that there is a good, healthy level of people seeking accommodation - which is what investors are looking for when selecting a location for an investment.

In an article on Property Update, director of Metropole Property Strategists Michael Yardney stated that the hotspotting trend is "speculation" and "not true property investment".

Instead, Mr Yardney states that he will base his property investment purchases on trends that are long-lasting, as opposed to ones that crop up and last a short period of time.

While buying into a hotspot market can have its short term benefits, there are also some long term consequences that can occur.

Mr Yardney stated that the process of buying into a hotspot market requires "adequate timing", which means that investors need to be in the know about trends and act fast in order to cash in.

Failure to enter the market at the right time may result in an unsuccessful property investment venture, as the opportunity window has closed.

This means that instead of following the crowd and buying into hotspots, it might pay to do your research and keep an eye on long-term trends instead - such as property values and demographics.

If you have plans to purchase an investment property, whether it's in a hotspot or not, have a read through resi's helpful Property Investment Guide for more information.

Categories: Property Investment