Here’s How To Create A Hotspot

Here’s How To Create A Hotspot
June 16, 2016 Simon Pressley

The more property-related material one consumes the more times one will hear the term ‘hotspot’. At any point in time, if we were to take stock of every location around the country that every so-called ‘expert’ was declaring a hotspot we’d be well within our rights to be expecting that property markets across the entire country experienced a never-ending property boom that was bigger than the world had ever seen.

What is a hotspot, anyway? If one was just about to purchase an investment property would it be wise to buy in a hotspot? Isn’t it more important what a market does over the coming several years than what it’s doing right now or might do next year? And, who amongst this ever-growing list of ‘experts’ actually has the credentials to warrant respect on property market outlooks?

Property is a topic that attracts so much interest that every second person lays claims to being an ‘expert’ and it seems that human beings don’t take much convincing. It’s amazing how many people have placed so much value on the opinion of that friend or family member who we trust and respect because this person has been successful in their career (even though that career doesn’t involve studying property markets). Similarly, investors hang their hat on a good location to invest in property because it was suggested by a person in an occupation with ‘status’ – such as that well-meaning accountant, mortgage broker, solicitor, financial planner, or even the local doctor. I find that insane but it happens a lot.

Then, of course, there’s the ‘experts’ who do actually have a full-time role involving property – some even have a really big profile – but the nature of how they earn their own income is such that their catch-cry is intentionally angled towards to promoting a particular location or a particular property. The property world is littered with vested interests and very few consumers would be able to detect who these people are.

Here’s some statistics which will hopefully make one question whether or not it is probable that the property world does have so many experts. According to the Australian Taxation Office, there are 12.7 million taxpayers of which 1.94 million people (8% of Australians) declare an income from a property (aka ‘property investors’). But, surely the definition of ‘investment property expert’ includes, although is not limited to, having a portfolio of several properties yourself? According to the ATO, only 0.9% of taxpayers own six (6) or more properties. I’ve done the math on that for you: a mere 0.5% of Australia’s 23 million population own six or more investment properties.

Now about those hotspots. If a market genuinely is ‘hot’, it’s almost definitely not the location with the best potential over the medium term anyway. Think about it: One decides to act on a claim of a hotspot so they get finance sorted, figure out exactly which pocket within that location is best to focus on, spend several weeks finding that ‘right property’, miss out on several, and then eventually do buy something, but at top dollar because the competition is so fierce. Most of the price growth in this cycle of that market is probably well behind us.

The best potential for growth is in a market that is probably flat or showing mild growth – it won’t be hot. As the world’s most famous investor, the great Warren Buffett, says ‘the time to be fearful is when everyone else is greedy and the time to be greedy is when others are fearful’. Wise indeed!

Most claims of hotspots end up being bland-spots. Genuine ‘booms’ only come around once in a while. But, that won’t stop people constantly spruiking about the next hotspot.
With human beings behaving as they do, let me show you how easy it is for someone to create the next ‘hotspot’ which, before too long, lots of people will invest in:

  • First, a property data company makes an innocent observation of a possible new trend evolving and mentions this on their website, newsletter, and press release;
  • Some journalists, who are often drawn to the attention of these high profile data companies, pounce on the opportunity to use this information to help fill their weekly quota of so-called news stories. For a greater impact from the story they throw in some dramatic terms like ‘heating up’ and ‘ready to take off’. Millions of people end up reading these articles;
  • A handful of people who own or work within a property investment business of sorts start seeing this location pop up in their news feed. They fumble around and come up with a few generic stats like population growth rates, make mention of some features and benefits like ‘public transport’ and ‘infrastructure’ and, suddenly, they’ve produced a hotspot report of their own on this location. If they have a vested interest in ‘promoting’ property in this location, it’s amazing just how jazzed up that report can look once it comes back from their marketing department;
  • Before long, we have got consensus. Everyone (somehow) is reporting the same thing. Even though no bugger has done an ounce of proper research. The sheep fall in line, like well-behaved lambs all beating to the same drum;
  • Thousands of people who happen to be interested in investing in property around this time so they have a heightened interest in property-related material. They are super keen to quench their thirst for information to help decide exactly where they should be investing;
  • These same people do something other than study property markets for a living and they rarely seek out the opinion of one those genuine experts. Unfortunately, they don’t realise that ‘reading’ isn’t necessarily ‘research’; often it’s just ‘reading’. This same location keeps popping up so they decide that it must be true;
  • Mission accomplished. We have a hotspot!

If you don’t believe me about this stuff, just think back to the latter part of 2014 when practically every ‘property expert’ in the country (although not Propertyology) was convinced that Brisbane was to be ‘The 2015 hotspot’. There was no substance to back their opinion up other than ‘Sydney had it first, Melbourne just got it, Brisbane must be next’ ~ it’s not the bloody common cold. Data companies have since reported circa 3% growth for Brisbane over the last twelve months.

Propertyology are Australia’s most respected Buyer’s Agents, not just analysts.


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