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The Golden Rules for House Hunting – No. 4
In this series of articles, I have outlined some of my “Golden Rules for House Hunting”. So far, we have looked at Rules 1 to 3:
1. Buy the worst house in the best street.
2. Look for streets with redeeming features.
3. Look for improving areas with easy access to the city/beach/facilities
This week we look at my fourth rule:
Golden Rule #4 – Capital growth is dependent on Location, Land, Looks
As with all things real estate, location is the most important factor as you cannot change this. You must ensure you get this right. So far as location is concerned, proximity to the CBD is the biggest driver of value. It is no coincidence that most of the expensive suburbs in our capital cities are located within 10km of the CBD. However, proximity to the sea is also a driver of value as many people want to live close to the beach. This is evidenced by the very expensive suburbs that are along our coastlines. Other locational factors to consider include proximity to a prime suburb, train station, large shopping centre and in the zone of a highly sought after public high school.
If there is only one phrase you remember from reading this article it is this one; “The value in real estate is in the land”. In other words, you should buy a property where a large proportion (at least 75%) of your purchase price, has gone towards the land component, rather than the building. For example, an old house on a large block of land is better than a brand new apartment on minimal land. The land component will continue to appreciate over time whereas the building will depreciate. The more of your money invested in the land component, as is the case with the old house on a large block, the greater the increase in value over time.
Properties with a great outlook, in particular views of water or the CBD, are in high demand and can often attract a premium price. You’ll pay more for them initially but you should also sell them for more. Looks also relates to the appeal of the property. Ideally, it should be a character/period home built before the Second World War. This includes building styles such as Edwardian, Victorian, Federation, Californian bungalows and return verandah villas. Art Deco is also popular is some cities.
When you are next on the hunt for property, remember the three L’s; Location, Land, Looks.
Happy House Hunting!
Written by Peter Koulizos, university lecturer, author and buyers advocate.