In this week’s Ask An Expert feature, David Whitburn tackles the myth of property hotspots and breaks it down once and for all for investors.
What are your thoughts on property hotspots? A lot of times I find people asking at APIA meetings Where is the next Auckland hotspot? But what if somewhere that was flagged, quite legitimately at first, as giving investors good capital growth and yield, was to bottom out due to over demand and the prices are to plummet? That would be stressful for owners who bought during the hype, especially negatively geared ones. Should I therefore take hotspot talks with a grain of salt?
Many people look for the next silver bullet and get rich quick scheme. Hotspots are sometimes giving by intellectual pygmies and that is disingenuous. The timeframe is an issue to consider too. Is it a next couple of months guess, medium term (say 5 year pick) or long-term >10 year pick? There is an element of crystal ball gazing of course, so hotspots have to have a level of art rather than be pure science.
Property investment is a get rich medium strategy in Auckland, and get rich slow in many other parts of New Zealand. Negative gearing is of course common as shown in the Barfoot and Thompson monthly suburb reports. The latest month’s statistics showed the average gross yield is 3.63%....
