Advantages & Disadvantages Of Every Property Type, A Worsening Rental Crisis & The Great Race
Last week, we looked at investing in property and more specifically, what you might look for in a property depending upon your goals.
We also looked at certain aspects you might avoid when purchasing.
Today, I thought I’d share some insights into the various styles of property and what advantages and disadvantages you might encounter with each.
Let’s get straight into it….
1. Low-set home – As we shared last week, the value of land goes up in value whilst the value of a dwelling itself tends to drop as the property ages and requires modernisation. If you’re going to buy a home, try to find the largest block you can for your budget. Modern housing estates are providing blocks that are smaller and smaller…many of which are no more than a glorified townhouse or villa on its’ own title. With people working from home more and more, a decent backyard with grassy areas (and room for a pool) are becoming harder and harder to find so this should be a consideration if you’re looking for capital growth in a property. Low-set homes appeal to older occupants (whether owner-occupiers or tenants) so there’s usually a slightly higher demand for lowest homes than highest or two storey homes given the ageing population we have in Australia. The negative is (of course) that low set homes occupy a larger footprint on the block to provide the same internal space and because of this, decent yard space can be very limited.
2. High-set homes – Many people may not realise this but the difference between a high-set home and a two-storey home is that a two-storey home provides ‘legal height’ downstairs…a high-set home does not. Most high-set homes were built prior to 1985 (the year the building code of legal height was changed to 2.4 metres). As such, there are many homes that have been built in underneath with bedrooms, bathrooms, kitchens and living spaces but no Council approval for such improvements. Is this an issue? Local Council almost certainly won’t be knocking on your door to remove the renovations unless they have an unusual reason to do so. There’s a few small negatives for not having legal height downstairs but the main one worth considering is that you won’t obtain landlord insurance if you try to rent the downstairs area separately. As such, the home must be rented as a whole although many rent it privately for ‘cash in hand’. If you’re thinking of building in underneath right now, the costs can be astronomical so make sure you obtain a fixed price with a builder. Should you undertake a project of this magnitude, the cost will generally increase the value of the home by around the same margin (as a general rule of thumb) although there are exceptions, so it pays to consider these decisions carefully.
3. Two-storey home – With two complete levels and internal stairs, the obvious advantage with this style of home is that you’ll obtain more yard space given the smaller footprint but with increasing building costs, a two-storey home is quickly becoming far more expensive to build. Because of this, we’ve seen prices of two-storey homes experience the highest percentage of capital growth over the past 12 months and this might continue for some time. The other factor that might be worth considering is the construction type of neighbouring properties – for example, if you’re considering a two-storey home that’s surrounded by low-set homes, there will often be more privacy on the upper level and additionally, you’ll more likely attract lovely crossflow breezes that won’t be blocked by your next-door neighbour. Many families with younger children will be attracted by the larger yard space whilst those with growing children will appreciate the separability so in many cases, a two-storey home is more suitable for families.
4. Duplex – If I were looking for an investment property where my main objectives would be a ‘set and forget’ as well as a property that would go as close as possible to being neutrally geared, I would definitely recommend a modern low-set set or two-storey duplex. Many of the duplexes built within the past 15 years offer a configuration of a 3 bedroom, 2 bathroom, 2 car garage plus a 2 bedroom, 1 bathroom, single carport dwelling. This sort of property might also appeal to owner-occupiers who might live in the larger dwelling and rent out the smaller dwelling as a way to combat increasing interest rates and pay off the mortgage quicker. This sort of property might also appeal to those that might seek to bring retired grandparents into the family home and assist with their adult children entering the property market.
5. Townhouse – Over the past few years, we’ve seen an over-supply of townhouses in South-East Queensland but as we’ve come out of COVID, it has not been surprising that buyers are now recognizing the value that many townhouses provide and choosing this as a suitable way to enter the property market. If I were looking to purchase a townhouse, I’d be trying to find one in a smaller complex as you’ll generally be paying lower Body Corporate fees. I’d pay close attention to aspects such as the number of guest car parks, options for parking if you have more than one vehicle (can you legally park on the driveway or does Body Corporate By-laws prohibit you from doing so) and what aspects of the property is the Body Corporate responsible for. Like all investments involving a Body Corporate, I’d want to see how much is in the Sinking Fund (for ‘big ticket’ maintenance and upgrades) and I’d peruse the Body Corporate records for a period of at least the past 12 months before purchasing.
6. Villa – Many people don’t realise this, but a villa is a low-set semi-detached dwelling (whereas a townhouse is a two-storey dwelling). Villas are very popular with retirees and those that don’t wish to enter an aged-care facility but still require a residence that’s very low maintenance. Again, you can still find some great value in villas around Brisbane and similar to townhouses, take the necessary precautions with your due diligence before proceeding unconditionally.
7. Unit/ Apartment – I must admit that this is my least favourite investment of all. There’s been a massive over-supply of units for quite a period of time, and we’ve noticed that units were the only category of property that didn’t experience significant capital growth over the past 18 months. Because there have been fewer workers required to travel to the CBD every day since new work policies were adopted due to COVID, vacancy rates were very high for a period of time although an influx of international students and migrant workers are starting to see vacancy rates dropping now. Avoid areas where there are many large apartment buildings in the same area as you might find yourself competing with new stock coming out of the ground and there’s every chance that State and Federal Governments might seek to incentivise first home buyers that purchase brand properties in order to keep the economy ticking over (just as they’ve done in the past few years). Be aware that the view you have now might be taken away buy a building that could be erected in the future – I cannot tell you how many times I’ve seen the value of a unit plumet when a city or river view is suddenly taken away by a building that no-one expected. The one big negative with a unit is the ever-increasing Body Corporate fees and the more lifts that are required to service the occupants of the building, the higher the Body Corporate fees will likely be – lifts are very, very expensive to service or replace. Most of the people I know that have lost money in real estate have done so with a bad unit purchase and unless you’re in a smaller boutique apartment complex, the capital growth is usually very limited.
Another factor to consider with any property purchase is the likelihood of similar stock to the market should the economy turn sour. For example, if you’re trying to sell a unit, a townhouse, a villa or any form of home in a modern estate where there are plenty of similar properties for sale at the same time, you only need a few properties to sell for ordinary prices (perhaps the sellers really needed to sell urgently) and all of a sudden, the value of your property has been significantly affected. It’s not only professional valuers that view the sales results coming through but nowadays, there’s so much data available to buyers that everyone is acutely aware of the prices being achieved. When there’s plenty of properties in your area that are very similar, there’s a higher chance that there may be a few sales that could affect everyone looking to sell in the short term. This is particularly relevant for any housing estate or complex where there are plenty of sales made within the past 18 months…sales that were made at the very peak of the market.
Next week, we’ll look at certain aspects of properties (such as fencing, suitability for pets, pools, spas, sheds, solar etc) and I’ll discuss whether these features are worthy of installing if you’re a landlord…and more to the point, how can you ensure your property is maintained as good as it possibly can be irrespective of what features your property possesses.
It’s a big week coming up with Halloween and Melbourne Cup Day on concurrent days so no matter what festivities you are partaking in, I hope you and your family have a great time.
Until next week…Happy Listing and Happy Selling.
Feature Property Of The Week
This week’s feature property is 19 Hero Street, Eaton’s Hill – a generously sized 4 bedroom, 2 bathroom low-set brick residence on an enormous 1522m2 allotment. Set well back from the street, this haven is very private and there’s room for extra vehicles such as boats or caravans as well as plenty of yard space and a sparkling in-ground salt water swimming pool. With multiple living spaces, sensational outdoor entertaining areas and a peaceful position in a quiet and picturesque cul-de-sac, this is a home that offers plenty of potential and great value for money. Brand new to the market within the past few days and already with strong interest, you might want to act quickly if you’d like to inspect this one!
Insights Article…
Here’s a news story published last week that’s a pretty fair account of what might transpire in the coming year with regards to rentals and the impact of an increasing number of immigrants about to enter Australia. This is certainly worth a read…
Click Here To Read Article
Did You Know?
Forget about the Melbourne Cup. The ‘Great Race’ has already been run. Michael has had an on-going friendly debate with a friend of his (a friend he plays indoor cricket with and against) about who is the faster runner. Last Sunday, there was an opportunity to finally set the record straight and an impromptu race was organised. Michael did come out the winner (only just) but there’s already talk of a rematch. Everyone agrees that it did look a little like two old men who’s minds were more willing than their bodies. Here’s the footage and photo finish.
‘The Michael Spillane Team’ is still averaging sales figures that are above their appraised prices despite the market conditions. Michael believes that many agents will deliberately over-appraise a property in order to secure the listing and this often results in the property selling for less than it should due to the fact that it’s been on the market for so long. Michael and his team pride themselves on providing honest and accurate appraisals and have the data to back this up. If you’re looking for an honest ‘obligation free’ idea of what your property is worth right now, feel free to contact us and we can assist you.
