Given the choice, would you buy property in a hotspot or an emerging hotspot?
Well, it depends on what you intend to do with the property once purchase buy it. If you are looking at rental income, an established hotspot would prove to be a more lucrative deal than an emerging one, mostly because it is easier to rent the units out, whether commercial or residential.
Some buy only commercial units, for the simple reason that it is easy to rent out almost immediately; within one month of taking the keys, in fact.
These people do not mind the higher-than-usual prices because the capital appreciation over the next few years more than makes up for the low/negative rental yields currently. These people have been spot-on thus far.
Emerging hotspots are suitable for first-time home buyers and for three reasons:
• It’s usually cheaper to buy (bigger-sized too).
• There’s usually already some amenities within the development.
• Many big brand names are already there which means the future will be bright – or else, these branded developers will also have a bleak future there.
Bear in mind that while there may not be a hypermarket yet, there’s definitely a thriving mini-market serving the residents there already.
There may be just one bank operating in the neighbourhood when you first purchase your unit, and no McDonalds anywhere in sight but it most likely has a decent budget hotel but definitely no 4-star branded hotel, for example.
Yes, all these differences meant that the price of a unit you purchase there has to be lower than the hotspots of today; where everything is already within easy reach in the neighbourhood itself.
The advice is not to overthink which offers better prospects because there is no such thing as perfect property at the lowest price. If it’s perfect, the price is surely at its peak. If it’s not at the peak, it’s surely not perfect.
What is within your control however, is the opportunity to view the unit first, drive around the area and get to know all the developments nearby.
Your gut feel from all these actual observations will usually be right. If it’s wrong, you just need to stay there longer for your unit to appreciate in value.
By the way, it’s very important that the area is full of big-name developers too.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.