It may sound odd, but knowing when to give up is perhaps the key to finding the next booming property market.
That piece of advice comes from Margaret Lomas, the head of property investment advisory agency Destiny, who believes many investors struggle to find the next investment hotspot after spending too much time and energy researching the wrong areas.
Lomas will be a keynote speaker at the upcoming Property Buyer Expo to be held in Sydney from 30 October – 1 November, and will share advice on what investors should look for as they try to find their next investment hotspot.
Included in that advice will be how investors can avoid what Lomas believes is the biggest mistake they can make when it comes to researching potential hotspots.
“The first step is to eliminate,” Lomas said
“The main mistake made is that investors spend hours researching an area they should have given up on after the first few questions. They then burn out before ever getting to a true future hotspot,” she said.
While knowing when to give up on an area is an important skill, it does mean investors need to know what to look for in an area, and according to Lomas there are a number of factors that need to be taken into consideration.
“There is a concert of factors which go to making up the necessary growth drivers of an area, and it’s important to note that these factors work together in synergy to create the desired growth outcome,” she said.
Examples of the factors people should be looking for in an area include a population made up of mainly families and growing faster than the national average, diverse industry and low unemployment and median household income which is growing faster than inflation.
Areas should also have a continued development of significant infrastructure, a council fulfilling the lifestyle needs of the families who live there and an absence of large scale housing developments or land that would allow for such developments in the future.
Investors should also ensure they know how to read the data they find and should keep researching until they find an area that fits all of the criteria, Lomas argued.
“Population data is something often misread. A rising population is not good if it’s increasing due to an influx of retirees, for example,” Lomas said.
“Population growth must include the kind of demographic which typically drives prices, such as the family demographic.
“People most often find an area which shows one or two of these characteristics and think ‘I’ve found a hotspot’.
“It’s important to note that all of the characteristics I have outlined work together to create growth. Any one alone is not enough.”
While Lomas’ talk will be on how to find the next property hotspot, she also has some advice for those who are considering selling up in an area after seeing out its boom.
“No one can buy an asset which will perform above trend every single year. A good investment is one which grows a little each year, but still has a period of above average growth somewhere in a 10-year period.
“If you have bought well, the rents will increase just after the values do, and so property is likely to become cash-flow positive pretty quickly.
"If you use the criteria I mentioned, even a cooling market will still grow from then on. It makes no sense to sell and pay capital gains tax when a property is in a sound area, is paying for itself and is still giving you small amounts of growth.”
The Property Buyer Expo takes place from 30 October until 1 November at the Sydney Showgrounds in Homebush. Come say hi to the YIP team at the Expo and hear from some of the best minds in Property. Get your free tickets by entering the code YIPPBE when you register at www.propertybuyerexpo.com.au.
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