Not many houses are on the market this spring auction season, making it all the more difficult to find a ‘hot buy’.

Owners are renovating rather than selling, which means the few properties for sale are fetching higher prices, making discounts rare.

But Real Estate Institute of South Australia president Ted Piteo says savvy investors will stay “on the hunt” because a shortage of housing stock translates to capital growth, if you can get in early.

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Momentum Wealth‘s Damian Collins, who owns a multi-million dollar property portfolio, sees undersupply as a key component of good investment.

He recommends buying an affordable house in an area with all the “demand factors”, such as proximity to infrastructure, amenities, employment, and shopping, but that has no risk of being swamped with new developments.

Hotspotting founder Terry Ryder says research is key, and that with careful planning you can buy to maximise both capital growth and rental yield, even in an undersupplied market.

In fact, Mr Ryder warns that the market may soon swing in the opposite direction – to an oversupply – in the next few years as developers overcompensate, which he describes as a “big, big warning factor”.

This glut of houses, which threatens to devalue your investment property if you pick the wrong area, is “looming” in Sydney, and already a problem in parts of Melbourne, Brisbane and Perth, so keep an eye on vacancies and building approvals, Mr Ryder recommends.

Avoid Sydney and Melbourne if you can

Damian Collins says Sydney and Melbourne are “overheated” and “at the top of their cycle”.

Real Estate Institute of New South Wales (REINSW) president Malcolm Gunning agrees. He has seen a “substantial amount” of high-rise, medium-density residential construction in the 20 kilometre ring around Sydney’s CBD, which will temper price growth.

The best buys in Sydney, according to Mr Gunning, are within the 10 kilometre ring, such as Parramatta, or in so-called ‘prestige markets’ – wealthy suburbs like Paddington and waterfront locations around the Sutherland Shire and along the North Shore.

These hot spots are “underperformed” and will become very popular, Mr Gunning says.

Melbourne real estate agent Anthony Webb, general sales manager at Philip Webb, says buying within 15 kilometres of the city, in any direction, is a good idea for those who do want to try their luck in Victoria’s capital.

Hockingstuart sales consultant Kendall Bares recommends Spotswood, Newport, and South Yarra in Melbourne because of the high growth seen in surrounding suburbs, which will hopefully “spill over” in years to come.

Brisbane

Property experts agree that Brisbane is a definite hot spot.

REINSW’s Malcolm Gunning says Brisbane is clearly underperforming and has growth potential as job opportunities increase.

“We think Brisbane is probably going to represent better investment value than Melbourne or Sydney,” Mr Gunning says.

Hotspotting’s Terry Ryder lists Brisbane in his top two picks because it is yet to experience strong growth, but is showing positive signs.

Momentum Wealth’s Damian Collins is telling his clients to buy in Brisbane because it “will probably be the best-growing city within the next three years”.

Metropole Property Strategists property advisor Michael Yardney doesn’t like picking ‘hot spots’ because they can so easily be proven wrong. But he does like Wooloowin, 6 kilometres from Brisbane’s CBD, because it caters to a young demographic of wealthy homeowners, is well serviced by public transport, and is likely to see strong capital growth due to its amenities and lifestyle attractions.

Cairns

Cairns-based real estate agent Chris Gay says his home town is affordable compared to capital cities and is a good place to invest because of upcoming major projects, such as the proposed $8 billion Aquis Development – an integrated resort and casino on the northern beaches.

“That’s one of a number of projects that are going to be in the city, which does bode fairly well for the area in general,” Mr Gay says.

The mining downturn has hardly affected the Cairns property market at all, according to Mr Gay, because it is not heavily reliant on fly-in, fly-out workers, unlike many other parts of Queensland.

Herron Todd White research director Rick Carr says Cairns has been improving ever since last year, with improving sales and an average price rise of 6 per cent, with more increases in store.

Other regional centres

Terry Ryder says a diverse economy is key, with the best regional centres to be found in Queensland, New South Wales and Victoria.

“What’s great about the regions, as long as you buy in the right one of course, is that they are a lot more affordable than the capital cities, they have better rental returns, and you can get pretty good capital growth if you buy the right ones,” Mr Ryder says.

Wollongong, Gosford, Newcastle, Dubbo, Tamworth and Wagga Wagga in New South Wales might hold potential for strong growth, he says.

Ballarat and Bendigo also stand out to Mr Ryder in Victoria because of their proximity to Melbourne, strong economies and a proposed regional rail link, which will speed up travel time to and from the city.

Adelaide

Mr Ryder’s second best pick for growth is Adelaide.

Mr Collins is more sceptical, saying it will do “reasonably”, but in the long term will suffer due to low population growth and a weak economy.

REISA’s Ted Piteo recommends buying within the six to seven kilometre radius of the CBD for strong capital growth and a reasonable rental return.

Mr Piteo also sees potential in the southern beach-side suburbs because of the opening of a dual freeway and an upgraded train system.

Canberra

The national capital is suffering from the “election factor” according to First National Capital Real Estate principal David Whittam.

Public servants, who make up a large portion of the population, have been spooked by the government’s budget and job cuts.

The city is also overbuilt, which means house prices are low – which could be the perfect time to buy into a reliable rental market, Mr Whittam says.

“Obviously the best time to buy is when there’s not the confidence in the market place.

“For the wise investor, it’s an ideal time to buy,” he says.

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