NEW house and land packages are not the best investments, according to a new analysis, reported on News.com.au with higher more consistent returns available from established properties.
Greenfield estates don’t perform as well as established areas, when it comes to investment returns, 6 Point Property managing director Simon Pressley says.
“We’re not talking about principal places of residence, which is an emotional decision about where you want to live,” he says.
Pressley, a financial planner with a real estate licence, says because greenfield estates are generally released in stages, buyers tend to always buy in the newer stages, even if the price is $20,000 or so higher.
“Just because an area is destined for population growth does not necessarily mean that it is an automatic investment property no-brainer,” he says.
“Imagine you’ve purchased your new property in stage one for $450,000. A year later stage two is sold for $470,000. What is your stage one property now worth?
“A further year and stage three is sold for $480,000 and so on. The value of your property will always be a margin below whatever the new stages are sold at.
“Meanwhile, the market in built-up areas is probably growing quite nicely. Properties released en-masse or in stages, as happens with new housing estates, often creates an initial over-supply situation.
“For values to rise, we need competition and that occurs when there is under-supply.”
Property valuers and investment buyers rely on recent sales data to determine what an asset is worth.
If there is a large number of similar properties, it is very difficult to say that one is worth much more, unless there is something compellingly different about it.
While new estate marketing agents concentrate on promoting things such as artificial lakes, new appliances and tax depreciation, this offers little real value when it comes down to the hard numbers that make an investment stack up.
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.