Known for its glorious weather, stable political climate and economic resilience, investing in prestige Australian real estate has long been popular with high-net-worth investors. The Gold Coast has moved to position 7 in the global rankings for Prime Real Estate, and demand to buy or rent prestige real estate has skyrocketed. Couple this with the Olympics on the horizon, and Brisbane and the Gold Coast property seem to have a bright future, whatever the crosswinds are today. But what do you need to consider if you are purchasing prestige property as an investment?
It’s an old one, but it remains true. The location of your property is essential to your investment success. However, it is not just a case of choosing the most prestigious suburb. Ideally, you want an up-and-coming suburb. Often (but not always), these are adjacent to well-established ‘prestige’ style that have become so popular that prices may preclude a good rental or investment return. When determining the location, take the time to explore and try the local amenities such as shops, schools and restaurants. The calibre of these services will give a good indication of the direction of the area. If there are upmarket restaurants, busy florists, and quality schools, it is likely to be on the up.
Once you have narrowed down your suburb with the most potential, you can look at the actual house and its location within that suburb. Take a good look at the home’s aspect and the properties surrounding it.
Are they well kept, new and in good condition? Have your neighbours recently completed renovations, or does their property look untouched since the 60s? You do not want to buy a house next to a home that will likely undergo extensive building in the near future. This would be a disaster and affect your ability to rent and or sell the property during that time, as no one wants to live next to a building site!
Regarding real estate investment, there was traditionally a delicate balancing act between buying a newly built home and a ‘fixer-upper’. Naturally, you will want to have any property you are serious about inspected by both pest and building inspectors to ensure that they are fundamentally and structurally sound. You will also need to arrange independent solar heating and swimming pool inspections.
Following this, you want to compare the property’s price with other similar properties and recent property sales in the same area. Remember, this is an investment, not a passion purchase. As such, money that will need to be spent on later restorations and fixes needs to be considered as they will diminish your returns.
With the ramifications of the pandemic still upon us, builders and developers are still suffering from supply chain delays and significant increases in both material and labour costs. Unless you achieve a below market price, now is not the time to embark on a substantial renovation project, especially for an investment property.
From the outset, you have to set a realistic and inclusive budget (that considers costs of sale and asking price) and have a clear picture of the returns you hope to achieve. Are you buying this house to achieve capital gains, or is it a rental income you are looking for? Or both? Knowing this will ensure that you do not make a rash (and ultimately costly) decision based on emotion.
Continue to Investing in prestige real estate: Part 2
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