What attracts investors to new property markets?
Even though property is seen as a long-term investment this is a market which is extremely fluid and can change on a regular basis. While it would be wrong to say that property market hotspots come and go in the blink of an eye, they can very quickly be overshadowed by a new investor favourite with the media extremely influential in this particular investment arena. There are a number of elements which make up a traditional “hotspot” which we will look at below.
Local economy
The simple fact is that if there is no economic magnet for investors and homeowners to look at a particular region then why should they bother? For any property market to become popular it needs to attract visitors and investors in great numbers. The easiest way to attract long-term visitors is to have a buoyant local economy with great prospects going forward.
On the surface it is not always easy to spot a buoyant economy of the future but there are tell-tale signs which can prompt interest.
Employment prospects
While many of the larger cities in the UK, and around the world, have a large array of prominent employers some of the smaller “hotspots” can emerge when one large employer decides to expand into a particular region. This may be public services run by the government of the day or it could be large prominent businesses such as for example the oil industry which dominates the local economy in Aberdeen.
As we touched on above, in order to attract investors you first need to attract long-term visitors to the region and what better way than good employment prospects?
Infrastructure
The infamous high-speed rail link commonly referred to as “HS2” was seen by many as the answer to the problems experienced by local economies in the North of England and Scotland. The idea was that this high-speed rail link would dramatically reduce travel times between the North of England, London and the South prompting more businesses to look further afield. The principle of investing where there are plans for an improved infrastructure is certainly a sound one but the fact that the high-speed rail link project may well be delayed is also a warning that things do not always go to plan.
Infrastructure plays an integral part in a local economy, local business arena and a modern day reliable infrastructure is something which attracts investors from far afield.
Affordability
The property affordability factor will vary from area to area and is perfectly reflected by the likes of Silicon Valley in the US where local house prices have skyrocketed. Compared to national house prices those in Silicon Valley look extremely overvalued but the fact is that extremely high employment packages in that region can support the price of property. One downside of the this particular scenario is that very often those living in the region before the “boom times” are not able to afford the higher cost of living in the longer term.
Conclusion
There are many different factors to consider when looking at a potential property “hotspots” of the future. Any investment prior to confirmation of for example infrastructure changes or greater employment opportunities carries a significant degree of risk but also a potentially large financial reward. Weighing up the risk/reward ratio is something which is unique to each individual investor as it takes in their circumstances and hopes for the future.