The recent comments from Matthew Quinn of Stockland, one of the largest home builders in the country about that need for future house sizes to be smaller, comes as no surprise to smart property investors.
The larger new homes, or McMansions, as they have been referred to, have never suited the needs of investors and will only cause pain and challenges for their current home owners.
These new homes are typically built in new estates and locations further away from the city than investors prefer, have low land-to-asset ratios due to the higher cost of the asset (house) and have what we consider to be, impractical floor plans.
The recent jump in energy costs has highlighted the pitfall of larger, open plan housing through the increased cost required to heat or cool larger living areas. Added to this is the higher general running cost with larger properties – all of which adds up for homeowners typically with a large mortgage. These cost increases place additional stress on mortgage repayments.
This design flaw of large open plan houses occupying the majority of the land size makes it difficult to remodel or renovate to creatively add value to the property. It will be interesting to see if local councils will allow homeowners to renovate or remodel these properties to accommodate additional occupants either for living or for rental purposes. This has become a common tactic in the past to lower living costs and to assist with the repayment of mortgages.
In addition, the population demographic of the typical McMansion location does not lend itself to providing a strong demand pool of potential renters. These areas are typically populated with new and/or young families who have moved there. Typically the investment market seeks people that have left home, want to live close to where they work, enjoy the attractions of the city life and do not have the restrictions of families.
With the property market outlook remaining flat for the short term the reality is that most homeowners with these styles of properties will see the value of their asset stabilise (or even fall) during a period when they are looking at their main asset to actually grow in value. It highlights the need to buy the right property the first time, even if it is to live in, it can still have the right fundamentals as an investment property.
Finding the right property with the right mix for you and your future goals is our area of expertise. It’s what we do each and every day and we continue to help our clients find properties that grow and outperform the general market.
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