Hotspotting tips to get you ahead of the pack: Rich Harvey

Hotspotting, or finding the best suburb in which to purchase an investment, is a crucial skill of every property investor. With the market heating up, it's only natural that competition in finding these locations has started to skyrocket.  

Property Observer will be heading to buyer's agents, developers, economists, researchers and other property experts to find out how they find their best growth locations and how you can too.

This week, we spoke with Rich Harvey, managing director of independent buyer’s agency propertybuyer.com.au.

Harvey is a licensed real estate buyer’s agent, experienced property investor and professional economist. The propertybuyer.com.au team has purchased over 1,100 properties in total.

Before zooming into a particular area, Harvey says he first identifies areas experiencing urban renewal.

“The word hotspot can mean it’s hot, then it goes cold. We’re usually cautious about it and look for areas with a long-term future,” he said.

Continual hotspots include areas that are close to any city's CBD.

“The middle and inner rings of Sydney always do well. Places like Alexandria and Redfern aren’t fully-priced and have the ability to move upwards in price,” he said.

“In Melbourne, St Kilda’s always been popular.”

He highlights areas that used to be “industrial wastelands”, or areas that have undergone rezoning.

Other factors to note are areas that have a limited ability for mass development, or have large infrastructure projects in progress.

“We look for areas that do not have a massive amount of supply about to come on,” he said.

Yet areas with projects such as hospitals, train lines, or universities could potentially become hotspots as well.

“Gladstone was a major hotspot. Obviously that has come down a bit, but it will come back in time. Over in Darwin they have the LNG gas plant. The North West Rail Link in Sydney – that’s going to be phenomenal. That’s starting to move the north-west market,” he said.

Demographics are also important. An area has a rising population can translate to strong rental demand.

Outside of metropolitan areas, Harvey notes that strong and growing employment opportunities need to be present.

“Without stable employment opportunities, prices aren’t going to move,” he said.

He also mentions the ripple effect, by looking at suburbs that have taken off and looking into its surrounding areas.

“Areas like Balmain, it’s a fantastic spot that’s always high in demand. But some buyers can’t afford $3 million, so they look at its surrounding areas. You might get some flight noise but it’s still a great area,” he said.

Harvey’s strategy starts with something he calls “ground-truthing” – conducting an assessment of an area by delving into statistics. By comparing data from various sources, including RP Data, APM, and Residex, as well as supply-demand ratios, his team then shortlists areas.

Thereafter, he looks at recent auction results and what has recently sold.

To verify the information on hand, he then visits the areas personally to speak with real estate agents and locals.

Here are some questions he asks:  

• What are the key drivers of the local market?

• What property types are in the highest demand?

• What price points are optimal?

• What is the average yield and growth?

• What streets should I avoid?

• What has changed in the area in the last ten years?

• What is likely to change in the near future?

• What are the clear tractions that bring people to this suburb?

While statistics are useful, he says locals are able to provide pertinent information about an area that might not be available otherwise. As such, it is important to conduct an on-the-ground assessment in addition to statistical research.