Failed tricks of the trade? 1 in 5 property ‘hotspots’ deliver negative growth

By Ceyda Erem ·

They say that to win in the property market, you’ll need a few tricks up your sleeve. Or do you?

According to new research from RiskWise Property Research, 1 in 5 property ‘hotspots’ have delivered negative capital growth and underperformed, while showing little to no ability to bounce back.

“Our research found that almost one in four ‘hotspots’ resulted in negative capital growth. This means the current approach to ‘hotspots’, which is affectively ‘buy and pray’, is a systematic failure,” said RiskWise CEO, Doron Peleg.

According to the research, approximately 23 ‘hotspots’ across Queensland, Western Australia, the Northern Territory and South Australia have delivered negative capital growth within the last 3 years.  

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“Of these, 14 delivered a double-digit negative capital growth. Property investors have suffered major losses due to so-called experts naming ‘hotspots’ that are proven failures.”

Some of the ‘hotspots’ included Roxy Downs (-46.3%) and Port Augusta (-31.7%) in South Australia (-46.3%) and Emerald(-41.4%), Gladstone (-27.6%) and Bowen (-24.2%) in Queensland.  

While there was no clear reason as to why these ‘hotspots’ failed to deliver, Peleg believed that it could be due investors failing to do their homework on a property’s region, growth, suburb, features and property type.

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“In the absence of that analysis it is harder to properly identify and accurately assess the risks and the projected returns,” said Peleg.

The second reason, according to Peleg, was external factors that investors failed to take into consideration, such as mining areas, which reportedly caused “significant losses” to investors.

“This has most certainly resulted in many investors losing money, particularly in regional and mining areas.”

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While it seems that Aussie investors are finding it tough to get it right in the property market, we thought it might be a good to idea to jot down some of the three most common mistakes investors make when looking for their next investment:

  • Choosing the wrong location - Similar to the report, failing to do your research can cost you big time. When choosing your next investment, try to avoid properties on main roads that don’t have any nearby amenities, as having a shopping centre or public transport close to hand is an incredibly attractive quality to tenants.
  • Letting your heart get in the way - If you think you’ve found the one, remember to ask yourself if it’s your head or your heart talking. While you should like the property, it’s even more important that you ensure that it will actually give you a greater return.
  • Allowing your rental income to cover everything - Relying on your rental income to cover the costs of your repayments is a big risk, especially if you’re unable to find a tenant for a long period of time. This could cause you to default on your loan if you are unable to make your repayments, so it might be worth taking our repayment calculator for a spin to find out exactly how much you can afford to borrow.

Ready to start hunting for your next investment? Head over to our home loan comparison tool to compare some of the latest investment loan deals.

Ceyda Erem
Ceyda Erem
Money writer

Ceyda Erem is Mozo’s authority on Energy, as well as having broader expertise as a personal finance writer. She loves to put her researching and writing talents into stories that help our readers to make more informed financial choices, whether that’s about finding the best energy deal or writing about the latest sneaky bank tricks. Ceyda has a Bachelor of Arts (major in writing) from Macquarie University.