BUBBLE or no bubble, boom or bust, some real estate just seems to be bullet proof.
Although most reality ‘realty’ television tells us that top dollar property is all about designer interiors that range from sleek stone kitchens to bespoke bathrooms, experts say it’s actually not what’s on the inside that counts.
Real estate has always been about ‘location, location, location’, but as property price growth across many major centres begins to slow down, 2016 buyers need to be more savvy when househunting. It’s no longer as simple as pointing to a suburb on a map and making an offer, buying ‘recession proof’ real estate is a skill that means the buyer needs to strike with the head and not the heart.
Buyer’s agent Wendy Chamberlain of Amalain said while making money is a priority for many buyers, it shouldn’t be the only goal.
‘It really comes down to someone’s budget, if you can afford the suburb that you really want to get into then buy there, but then the question becomes ‘Why are you buying?’ Is it for your own home to live in and is it a lifestyle choice? But if it’s an investment consider if you actually buy in an equally attractive area that isn’t going to cost you as much but is up and coming then you’ll probably do better over time,’ she said.
‘As an investor buying into a blue chip suburb you’re probably going to get consistent growth, but you may not get the good rental return that you otherwise would in a less expensive neighbourhood,’ she said.
THE FIFTEEN MINUTE RULE
There’s a little known principle when it comes to property buying, stick to it and you can (almost) guarantee your investment will remain solid.
City slickers, who spend weekdays stuck in their cars commuting in hellish traffic or crammed up against some undesirable on a sweaty train or tram, want to spend as little time as possible in traffic after hours. So that’s where the 15 minute rule comes in.
‘And when I say 15 minutes, mean a buyer’s agent’s 15 minutes, not a real estate agent’s idea of 15 minutes,’ said Chris Gray, buyers agent with Your Empire and presenter on the Sky News Business channel.
‘We always look to buy within a kilometre of the centre of a suburb. Because even a few metres can actually make that extra bit of difference between a yes or a now for a future a buyer, or a tenant. It can even be the difference of one side of the street to the other,’ he said.
Wendy Chamberlain agreed the 15 minute rule is a great guideline for ensuring capital growth.
‘Think about it. If it’s stinking hot, or pouring rain, do you really want to be walking for more than 15 minutes?’ she said.
‘You want to buy within a five to 15 minute walk to a train or tram, or a bus. And it would be nice to walk to your local little shopping village and cafes. Take a look on any Saturday or Sunday morning and see who’s sitting at these cafes with their prams or bikes,’ she said.
THE LOCATION THEORY
Veronica Morgan, buyers agent and host of Foxtel’s Location, Location, Location knows that address is everything in a good real estate deal.
‘Take a look at blue chip property. When you think about it, clearance rates never really drop below 50 per cent even when things are slow and that’s not bad. That means there are still half of the properties in a neighbourhood that are snapped up on or before auction day. Then you’ve got to realise that those other 50 per cent might not be great quality so if you buy well you’re in a good position,’ she said.
Mr Gray added that savvy buyers aren’t distracted by beauty.
‘Essentially I buy lots of ugly buildings, but they’re in great locations,’ he said.
‘Whereas another investor might buy in a beautiful building not in a great location. You can change an ugly duckling, but you can’t change it’s location,’ he said.
Ms Chamberlain said while real estate in inner city suburbs is often recession proof, it is also possible to buy well in other areas if you think outside the box.
‘Traditionally, people have had a bias against certain suburbs, but what happens is that through gentrification and governments putting lots of money into a particular area for things like trains or shopping centres, It changes people’s opinion of a particular area,’ she said.
‘And then you’ve got migrants coming into an area. They don’t know about all that old bias, they don’t care about it’s old reputation. It’s an old school thought that if you’ve lived in a city all your life you’re not going to buy or live ‘out there’ because it’s got this, or it’s got that A neighbourhood could have changed over time, but your thoughts of it haven’t.’
THE QUALITY TEST
Ms Morgan said while ‘location’ remains the number one rule in real estate, it shouldn’t be looked at in isolation.
‘I’d insist that quality is a very close number two. There will always be an underlying demographic for quality properties and it will always be the case in almost any market condition. But let me say I really must underline the word quality,’ she said.
‘What is fundamental is a great floorplan. When you’re talking about the home itself that is priority number one. You’ve also got to get the architectural style right for the neighbourhood you’re buying in,’ she said.
When buying an apartment she said the floorplan can make or break a deal. She added that an apartment with a balcony off the bedroom is not ideal, neither is a flat where the only bathroom is an ensuite, or one bedroom is smaller than the other. None of those factors are ideal for investors who want to capitalise on tenants who share with flatmates.
‘With a house there can be a whole miriade of issues with a floorplan but one big one with terrace houses is the bathroom situation. If the only bathroom is downstairs and there isn’t one upstairs then that property can sell for far less than a home nearby with a modern layout,’ she said.
THE BRAND NEW BAN
A shiny new apartment might sound like a good idea on the glossy surface, but according to the experts it’s not a great plan for gaining capital growth.
‘That’s not the kind of quality I’m talking about!’ Ms Morgan said.
‘Honestly most of it’s awful, we don’t touch it. Our motto is to avoid risk, and those new developments are a great risk. When a property is new in a new building there’s no history, nothing to predict how the building will perform in the future. On top of that there is a real risk of oversupply in some areas. So steer away from those,’ she said.
‘People need to get away from the idea that a new property is a quality property. Think about it, when you want to resell and it’s no longer new then primary market is gone, who is the secondary market?’
‘It’s like buying a new car. The minute you drive it out of the showroom it’s lost value immediately. It can take years to see capital growth. I’m not willing to wait five or more years and have my money tied up,’ she said.
Mr Gray said buyers are dazzled by new developments ‘every day of the week’.
‘Developers are wealthy because they do something very well. Trying to buy something that’s beautiful is the last thing you should be looking at,’ he said.
THE HOLY TRINITY
The university, the hospital and the good government school. Whether you’re a buyer who plans to live in the property, or an investor hoping to have a steady stream of tenants (and income), this trio of amenities almost always delivers.
Although buyers might baulk at having rowdy university students as tenants or neighbours, they’re not the only residents that come with a tertiary institution in the neighbourhood.
‘If you’re near a university don’t always think you’re going to get uni students. There are always going to be lecturers and other people looking to move in,’ Ms Chamberlain said.
‘And the same could be said about the school catchment. People will pay top dollar to live in an area that has a good government school. It can add tens of thousands of dollars to a sale, maybe more,’ she said.
But buyer beware when it comes to student accommodation, said Mr Gray.
‘Down in inner Sydney in Ultimo, for example, there are all of these small student accommodation units that are just single rooms and they’re getting a 6 per cent rent return. People love them because they’re cheap, but the purchase price doesn’t really change. If people are buying based on the rental return then they’re always going to be investor clients. What that means is no one falls in love with student accommodation and that’s the kind of thing that ultimately pushes prices up,’ he said.
‘With hospitals it’s a great idea to buy on the right side of any main road because hospital workers work in shifts and they’re not going to want to cross main roads or walk far in the middle of the night,’ Ms Chamberlain said.
Ms Morgan said while hospitals and universities are often good neighbourhoods to buy in, there needs to be diversity in a suburb.
‘I wouldn’t buy anywhere that had just one element. It’s like buying in a mining town. You have to give people other reasons to live somewhere. If someone lives somewhere just because they’re working there or studying there – and that’s the only reason – then if things change for them they’ll want to leave. If you’ve buy in a lifestyle suburb then future buyers or potential tenants will want to stay in that neighbourhood long-term,’ she said.