What Phil Tarrant’s buyer’s agent looks for in a hotspot

“A hotspot is something that’s going to outperform the market in terms of growth, and once again people need to be very careful when they're looking for that next hotspot goldmine,” Mr Water said to Smart Property Investment.

“Once it becomes general knowledge and it becomes known as a hotspot, the horse has bolted, it’s too late.

“Quite often, a hotspot can be a hotspot because people have the fear of missing out and it’s self-perpetuated.”

When he looks for potential areas that are going to outperform the rest, there is a few fundamentals that he looks for, but it’s not the fundamentals of infrastructure, jobs growth, and other commonly accepted identifiers.

What he looks for is what he calls the ripple effect in terms of affordability, which he explained as “those fringe suburbs where perhaps it has the same infrastructure, it has the same lifestyle appeal, clearly it has some potential, but it’s just that little bit further out.”

“A hotspot, generally speaking, needs to be in a market that there is already activity … based around consumer sentiment and a lot of people don’t realise that the growth is revolving around the availability of finance and also consumer sentiment, so look for those little nuances … which will give you the potential areas for hotspots,” he said.

“It’s the next suburb or the next suburb after that along, that perhaps hasn’t had the attention yet, yet it has all the same characteristics … [and] as people wrestle with the whole affordability scenario, especially in today’s lending environment where you’ve got finance [that] is hard to get, then you’ve got the combination of perhaps negative media around and people’s consumer confidence; the sentiment is starting to ebb a little lower.

“They naturally start to look for these more affordable areas and we tend to try and identify those, if you're going to use the word hotspot; we try to get in there before it happens.”

Applying this logic to Sydney, Mr Waters views areas south-west and north-west as smart property investments, even going as far as the Central Coast regions, which he views as having good infrastructure and accessible to employment hubs.

Then, looking to Melbourne, Mr Waters recounted he saw the areas of Geelong, Ballarat and Bendigo two years ago as hotspots due to the ripple effect of affordability, which paid off 12 to 18 months later as these areas experienced high-levels of growth. Today, these regions can still be considered hotspots, but due to self-perpetuation.

“Because of affordability and, at this point in time, it might also be a case of self-perpetuation as people buy there because it’s been talked about a lot,” Mr Waters said.

Western Australia was an area that Mr Waters was wary of, calling it a market in flux.

“Some of the reports show it’s bottomed out, but just because a market bottoms out, doesn’t mean it naturally starts to go up again, there might be a period of no growth,” Mr Waters warned.

In Brisbane, Mr Waters identified the north, west and south of Brisbane, just outside of its affordability corridors, as attracting attention not just from locals, but also from interstate migrators and investors sick of dealing with Sydney and Melbourne’s affordability issues.