How to look beyond the surface to recognise a good investment opportunity
When looking for your next property acquisition, it can be easy to get swept away in the romance of it all – even the most savvy investor has been known to crumble at a walk in robe with ensuite or herringbone parquetry floors.
But as every expert will tell you, when it comes to purchasing for investment, it’s all about the numbers.
Wilson Property Agent’s principal and director Adrian Wilson advocates considering a property’s per square metre value as a way of looking past the fancy trimmings and getting to the property’s true investment potential.
“While location and magnificent views are an important factor to consider when purchasing a
property, there is also the consideration of dollars per square metre when searching for the right place,” said Wilson.
“One of the best acquisitions we have available for a discerning opportunist is a penthouse property located in ‘The Bond’ on Hickson Road, occupying some 539 square metres and listed for auction in the mid 3 millions.”
“The value for money on this property is exceptional when you conduct a property comparison and calculate the dollars per square metre,” Wilson said. At a listing price of $3-3.5 million, the Hickson Road apartment’s value equates to around $7000 square metre.
“I have been unable to locate any comparable sales data that supports a dollar per square metre rate at less than $10,000 to $12,000 per square metre for this property, putting its worth at upward of $5.5 million – a rare opportunity for a high end purchase.”
The Hickson Road penthouse is opposite the Barangaroo development, with views north of the headland park and out towards Goat Island on Sydney Harbour. At over $6 billion, Wilson says that Barangaroo is likely to be the largest infrastructure project Sydney will ever see.
According to Tolga Ozer, sales director at Wilson Property Agents, a recent sale he conducted in the Barangaroo development highlights the value of considering a property’s dollar per square metre value. Ozer sold and exchanged a two bedroom apartment in Barangaroo’s Alexander building for $2.2 million, directly across the road from the Hickson Street penthouse.
“This two bedroom apartment in the Alexander building is circa 113 square metres on level six, plus one car space and is due for completion in 2015,” said Ozer. He compares his recent sale with the penthouse on Hickson Street.
“When you compare a mid-level two-bedroom property, which achieved $19,469 per square metre against a luxury 539 square metre, four bedroom penthouse on Hickson Road, with three car spaces, going for around the $7000 per square metre mark, the opportunity and rarity of this investment is really put into perspective.”
Next time you’re attempting to compare your potential investment to similar sales, consider the dollar value per square metre metric. It can also be used to calculate a ceiling on what you’re willing to pay for your investment.
Other top tips for recognising a property’s true value, from the experts:
- Don't confuse "expensive" with "high quality". Capital growth potential is what counts.
- Follow a process, not your intuition. For Mal James, the process is this: Clarity, assess-value, negotiate.
- Living in an area doesn't mean you know it's investment potential. Familiarise yourself with the figures.