Picking property hot spots in the current market is not always easy, but one thing is certain if there are any bargains they are going to be at the lower end of the market.
The doubling of the First Home Owners Grant has and will continue to bolster demand for lower priced property, although to some extent it is at the mercy of the economy.
Another reason why cheaper properties should thrive is that it is this segment that missed out on the strength of the market back in 2006-07. The two forces should combine to make this the area where growth is more likely.
Given the precarious state of the economy, it's unlikely you will make a motza on any property in the next 12 months, but now may be a good time to buy if you are looking for a medium to long-term investment. And that is what property is.
You cannot trade property like shares, so a three-to-five year horizon is much more realistic, not least because of the costs involved with buying and selling.
Most property data is historical, so with the uncertainty in the national property market, it can be difficult to predict hotspots going forward. However, one way to evaluate a suburb's potential is to look at the auction clearance rate and the rental yield.
According to Liam O'Hara, senior economist at Australian Property Monitors (APM), a good auction clearance rate indicates the ease with which you will be able to sell a property and hopefully at a reasonable price. The gross rental yield, meanwhile, is a good indicator of how much you can expect in terms of return.
Of course auctions are not the preferred method of selling everywhere in Australia, so this yardstick may not necessarily always reflect the true situation.
But if the maxim that the key to success with property is buying at the right price is true, then there are plenty of potential hotspots in in every state and territory.
NSW hot spots
Angie Zigomanis of forecasting group BIS Shrapnel says that any suburb with properties selling for less than $400,000 will be good buys in Sydney.
One of the hotspots selected for NSW is Granville in Sydney's west, where the median price for homes, according to RP Data's property analyst Cameron Kusher, is $345,000.
"Granville is one of the most affordable suburbs within a 20km radius of the Sydney CBD," says Kusher. "It's in a great location, close to Parramatta with strong renovation potential and good transport."
APM puts the auction clearance rate for Granville at 60 percent and the gross rental yield at 5.69 percent.
Also in Sydney, Kusher recommends Macquarie Park, a new precinct just 12km from the CBD. He says Macquarie Park is close to Macquarie University, the commercial office markets in North Sydney and Chatswood, near Macquarie shopping and newly created railway stations. The median price for a two-bedroom unit in Macquarie Park is $400,000.
In regional NSW, Kusher suggests Iluka on the north coast. Across the river from Yamba but not as busy, Iluka is a popular holiday spot, close to world-listed rainforest. Within commuting distance to Grafton, the median price for a house is an affordable $380,000.
Using the logic of APM's O'Hara that auction clearance rates and gross rental yields can be good indicators of property hot spots, suburbs in the Canterbury area of Sydney have some of the best clearance rates for units. Wiley Park, Lakemba and Campsie all had clearance rates for units of more than 90 percent.
When it comes to houses, Lethbridge Park in Sydney's west is the pick of the crop with an 84.62 percent clearance rate, followed closely by Villawood at 84.21 percent.
In terms of yield, Gerroa on the coast south of Wollongong boasts 15.43 percent gross rental yields on three-bedroom houses followed by West Wollongong units at 8.63 percent.
Keep reading - next article