How to Find New Property Hot Spots

With property price rises slowing down and interest rates on the rise it is now more important to find the right location for investment property.  Capital appreciation is important for a return from your investment and this is best achieved if you can find these much sought after ‘Hot Spots’.

A property hot spot is a town (or even an area inside a town) that will offer a good level of capital appreciation over a relatively short period of time and rises faster than the national average.  So where are these areas and how are they found?

Let me give a couple of examples of year on year average property price rises.  In 2004 the average price of a house in Castleford rose by 34.69% when the national average was 10.62%.  In 2005 the average price of a house in Doncaster rose by 34.06% compared to the national figure of 16.23% and in 2006 Hull had a rise of 14.96% compared to 3.55% nationally.  These are all areas that have been subject to inward investment and infrastructure changes that have made them more desirable areas.

Many national commentators have labelled Hull as the worst City in the country.  Many of their criticisms are wide of the mark, but areas of the City have required improvement.  An observation that seems to have been acted on and rectified.  Hull is no longer how the outsider perceives it and the number of developments taking shape around the area will show these experts a completely different landscape.  For those property investors who took the risk of investing their money into ‘Britain’s worst city’ are now reaping the rewards of equity through the capital appreciation that has inevitably come.

When looking for a hotspot you should look for an area that will become more appealing to live in, primarily for the rental market.  If you are looking for the ‘buy to let’ market, look for an area that will increase in demand for renters.  This will allow you to increase the rental income and will in turn increase its value to other landlords. 

When looking for a ‘buy to renovate’ project you are looking for a quicker appreciation area, these are more difficult to find and are riskier for the investor.  You will need to be right on the cusp of boom in house price rises for the area and this is more difficult to judge.  The returns are bigger and quicker but this comes with the greater risk.

Hot Spot finding comes down to research and being ahead of the pack, find out which areas have qualified for investment and watch the area improve whilst your tenant pays your mortgage.  The other investors will join and push up the value of your houses.

Here’s to happy (and rewarding) property investment.

Editorial by Homefinder’s Steve Bletsoe.