Buying property takes more than cliches

Greville PabstDecember 8, 2020

Buying property is the biggest investment decision most people make in their lives. Yet surprisingly, many Australians buy property with little or no investigation into the factors that drive individual property performance. 

Instead, they base their decision on assumptions, inadequately researched or incomplete information or third-party assurances that the property they are considering will provide them significant return on investment. 

Unfortunately, in the digital age misinformation is prolific and the cause of many poor investment decisions. Even well-trusted beliefs can prove misleading for the most experienced homebuyers and investors. 

However, questioning the validity of property clichés and commonly held assumptions can help both buyers and sellers make better informed decisions when it comes to investing for their future. 

Location, Location, Location:

The most well-known property cliché, location, is quoted as the quintessential factor when it comes to property selection. But, what many buyers fail to realise is that location is far more than just the right suburb or even the right street – it is as specific as the lot number or position in a block of units. 

While neighbouring properties may appear similar in many ways, factors such as aspect, orientation, floor plan and levels of natural light, not to mention security, all have an important impact on property value beyond the underlying land value. 

Hotspots:

It’s not uncommon for investors and buyers to chase the next big hotspot with hopes of making a quick buck. But, hotspots aren’t all they’re cracked up to be. 

By definition a hot spot is a suburb or area predicted to benefit from rapid short-term gains in value. However, despite an initial spike, a hotspot is usually characterised by slow or limited growth in the long-term that often eventually undermines short-term gain. 

Due to the high transactional cost of property investment real estate should be viewed as a long-term proposition, which means hotspots often fail to provide the exceptional growth buyers hope for. 

Timing is everything:

Analysis of historical sales data clearly shows that it isn’t when you buy but what you buy that’s important. Purchasing a property based on price alone is no guarantee of future growth performance. Selecting the right property with the right profile for growth will ensure property owners have an asset that performs irrespective of wider market conditions. 

Keeping up with the Joneses:

Some of the best performing properties aren’t glamorous at all. When buying property don’t be fooled into thinking the more you spend the greater the likelihood of good capital growth. In fact, buying a flashy new property or one considerably above a suburb’s median price can limit buyer demand and subsequently growth. When investing, don’t buy property that appeals to buyers’ aspirations. Buy the one that caters to the financial and social requirements of the potential tenants and buyers in the area. 

Sitting on the sidelines:

During uncertain economic times it’s common for buyers to withdraw from the marketplace in anticipation of property prices reaching the bottom. However, adopting a ‘wait and see’ attitude to buying and selling real estate can be disadvantageous. 

The reduced competition during a downturn can create good opportunity for savvy buyers. But history shows that most buyers tend to return to the market after a positive shift in sentiment, and subsequently values, has already occurred. 

Those that have bought well needn’t worry about selling in a downturn either as quality real estate assets are always in high demand. 

So don’t wait for others to make the first move. Base your decision to buy on your personal financial circumstances, not market sentiment.

Greville Pabst is CEO of the WBP Property Group.

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