What one investment consultant says about hotspots

Forget hotspot lists, you need to dig deeper
Property hotspots and lists of the next suburb to boom are a perennial favourite among investors, and we’re often asked where we think will take off next. While location is of great importance when investing in real estate, the property itself is the most important thing.

It’s easy to fall into the trap of thinking that just because a property is in a particular area it will be a great buy; this may not pan out on closer inspection of the property itself. So while hotspotting lists can give you an idea of where to look, you need to be sure you’re buying the right property for the right price, not only in the right place!

Michael Matusik, of Matusik Property Insights, has shared his thoughts on hotspotting lists on this great read on Property Observer.

Forget hotspotting lists, you need to dig a lot deeper: Michael Matusik

I am often asked about the latest hotspot.  Last week I gave several presentations – and after every one – someone asked for my list of ‘hot suburbs or areas’.

I generally reply, “I really don’t care about so-called hotspots.”

And then I ask two important questions.  Firstly, “are you a property speculator or a property investor?” Followed by, “what measure, do you think, is being used to judge an area’s heat?”

Everyone – well almost everyone – replies they are an ‘investor’ not a ‘speculator’ and they understand the need to hold property for considerable time to maximise their investment return.

As for my second question, few really have an answer.  Many are actually baffled by my premise.  Some even think it is irrelevant.   But I don’t.  It is, in fact, at the heart of the matter.

From my 25 years as a property market analyst, I know one thing is for certain – it is the easy things that get measured the most.  The things that should be measured rarely are.

And the easy things – and especially median or average prices on a small area/suburban basis – can be extremely misleading.  More often than not, they misrepresent what’s really going on, as they illustrate what sold during a reporting period, not – I repeat, not – a change in actual value.

Yet this is what most ‘hotspotting’ commentary – and all those silly lists – are judged on.  This unit of measurement is deeply flawed.  It is why hardly any of the suburban-based hot spotting forecasts actually come true.

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