Hedland & Newman

How to Find a Hotspot

April 5th, 2013 • No comments

Research – The Key to finding positive property hotspots

Research is a critical part of the investment process. To ensure an informed decision is made there are some key areas to focus on when seeking to invest in positively geared property.

Growth rates

Historical growth rates should be investigated over 10 years to ascertain a sustainable growth path, rather than simply looking at the last 12 months, or the most recent quarters. As an example, over the last two quarters Port Hedland’s median house price has dropped 11%. The data over the past 10 years however shows the town has had an uninterrupted annual increase since 2003, growing by 18% over the period. The recent fall is due to seasonal movements and a pause between project developments  – when the second phase of development commences this year, prices are expected to continue their steady rise.  

Industrial growth & infrastructure investment

A severe housing supply/demand imbalance is most typically seen in smaller towns (populations between 5000 and 30,000) where the effects of industrial growth are greater due to smaller and less diversified industrial profiles. Industrial growth and the infrastructure development that follows can heavily influence population numbers as construction projects bring with them large workforces, increasing demand for accommodation.

Population trend & vacancy rate

The population trend should be examined to determine the sustainability of an increase. If a town’s population shows a historical downward trend then there is likely to be housing over supply which means the arrival of a new workforce will have less impact on demand. A town’s vacancy rate is also an indicator of an over or undersupply of rental stock. A consistent increase in population, such as that seen in the central Queensland industrial hub of Gladstone, suggests that (if new development is constrained) supply will struggle to keep up with demand.

Housing supply

Another factor to consider is whether more housing is in development and what onsite accommodation a construction project may supply to its workforce which will reduce pressure on rental stock.

Corporate tentants / Median wage

At the same time, many workers also have families and those that relocate with them will require proper housing.  Construction and mining companies will source often high numbers of rental stock and pay premium rent to ensure they secure accommodation suitable for this portion of its workforce.

A high median income, such as that in Moranbah in central Queensland which is double the national average, is also good indicator that top rents are being paid.

The above information is all available on government websites, REIWA and through property research portals. CPG’s independent expert reports available on its website, are also a good starting point:
http://www.crawfordrealty.com.au/investment-positive-property-reports

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