A property’s value is typically divided into two components: the land value and the value of any improvements, such as the dwelling.
Conventionally, land tends to appreciate over time, while buildings are said to depreciate as they get older and suffer more wear and tear.
However, the rise in construction costs poses an interesting question: what impact do rising construction costs have?
In today’s episode, Stuart Wemyss and I discuss the ramifications of soaring construction costs on property investment.
We cover the challenging landscape of the property market, focusing on aspects like renovations, investment locations, and the power of a positive mindset.
From analyzing historical trends of construction costs outpacing inflation to discussing strategies for creating intergenerational wealth, Stuart’s insights provide an in-depth exploration of property investment in the face of rising construction costs.
How rising construction costs shape property investment landscape
As construction costs have soared by almost 30%, investors face significant challenges when evaluating their investments.
My conversation with Stuart Wemyss, director of Prosolution Private Clients, also delves into the crucial aspects to consider when buying a property, how the renovation can boost property value and cash flow, and the unique appeal of discretionary and aspirational investment locations.
- Rising construction costs and their effect on property investment
- The costs of medium-density and high-rise apartments have gone up even more than the cost of normal dwellings, due to increased regulations
- The different factors to consider in property returns and what has to be spent on maintenance and upkeep
- The historical trend of construction costs outpacing inflation
- The role of renovations in enhancing property value and cash flow
- Calculating return on capital when renovating a property
- The appeal of investing in discretionary and aspirational locations
Regardless of the complexities and challenges presented by rising construction costs, our conversation underscores the importance of maintaining a positive mindset, strategic thinking, and continuous learning in navigating the property market.
Ultimately, with the right resources and mindset, going beyond the ordinary in property investment is achievable.
Links and Resources:
Stuart’s Book – Rules of the Lending Game & Investopoly
Some of our favorite quotes from the show:
“I'd rather have a tenth of a block of land in an apartment in Bondi, overlooking the water and overlooking the beach, than a couple of acres in the middle of Alice Springs or Darwin.” – Michael Yardney
"But I just wanted to clarify that while we're saying land is king, not all lands are created equal, just like on the Monopoly board.” – Michael Yardney
“But here's the kicker: If you're afraid, then all the goblins that you fear will be attracted to you. The only useful purpose of fear is to remind you to plan so you can protect yourself from harm, but don't become timid because of it.” – Michael Yardney
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