Property hot spots prove ice cold
It appears prognosticators have missed the mark when identifying suburbs with capital growth potential.
New analysis by RiskWise Property Research found nearly a quarter of suburbs identified in "hot spot" property predictions actually delivered negative capital growth. The examination of the top 100 suburbs named in 2014 property hot spot lists found that 23 saw house price falls, with 14 experiencing double digit declines.
"Our research found that almost one in four hot spots resulted in negative capital growth. This means the current approach to hot spots, which is effectively to 'buy and pray', is a systematic failure," RiskWise CEO Doron Peleg said.
Peleg said the results were consistent with analyses of 2011 and 2012 hot spots, which also delivered negative capital growth, with some mining towns falling as much as 46%.
"People who invested in the mining states not only suffered significant losses, but there was no capacity to recover from them," Peleg said.
Peleg said the research showed only 37% of houses and only 33% of units on hot spot lists performed as well as the market benchmark.
"Which means that overall the 2014 hot spots performed significantly lower than the benchmark," he said.
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