There’s no arguing that the Perth property market is working in overdrive at the moment, and this is highlighted by CoreLogic’s Home Index report which shows a 1.6% increase in dwelling values during January, marking 6-months of growth for the local market. Perth’s forecast growth, the relative affordability of the market, low interest rates and government incentives have combined to create levels of buyer competition – from both owner occupiers and a growing section of investors – not witnessed in several years. With this competition comes an increased sense of urgency from buyers who want to avoid missing out, in some cases leading to compromises and rushed decisions when purchasing real estate.
As many of us have already experienced, however, successful property investing is as much a result of the properties you avoided as it is the ones you purchased. Here are three properties that our buyer’s agents have recently said no to, despite them appearing to be investment grade.
Flight path concerns
Located in a quiet cul-de-sac on the Canning River in Riverton, this large family home appeared to show great investment potential for one of our clients looking to purchase a property. Situated only a short drive to several major shopping centres and located right on the river amongst an abundance of parkland and natural amenity, this property looked to sit firmly in the investment-grade category. Sitting on an 822sqm block, R30 zoning meant the property had the added potential to subdivide into three separate blocks in the future if our client wished.
On paper, the property looked good. However, during the due diligence process our team found an issue with the location of the property. Despite not being in a part of Perth typically known for issues with air traffic, the house was located directly under Perth Airport’s N65 Noise Contours that many buyers are unaware of.
Despite the property meeting a lot of the criteria to be considered investment-grade, the location under the flight path is a negative drawback to future buyer and tenant appeal, which could impact rental returns in the short term and resale opportunities in the future. Additionally, this factor will only increase with the addition of Perth Airport’s new second runway, which was enough reason for our buyer’s agency team to advise this client to look elsewhere.
Patience pays off
Not all properties that our buyer’s agents say no to are due to physical factors like location. Offering an un-biased and independent opinion, our buyer’s agents can help provide a voice of reason for clients who may be grappling to choose between two properties, or who may be letting their emotions get in the way of making a sound financial decision.
When approached by a client who was looking for a house in Perth’s northern corridor, one of our buyer’s agents had narrowed the search down to two separate properties, a 4×2 in Hamersley and another 4×2 just up the road in Duncraig. Both offering tidy established houses on 700sqm blocks, the two properties were so similar that it was impossible to choose based on physical factors and the final decision came down to price. Through having a thorough understanding of the local market and by researching recent sales data of similar properties, our team estimated the Duncraig property’s market value between $770,000 – $790,000 and the Hamersley property between $610,000 – $630,000. The agent selling the Duncraig house listed the property well below our appraised price and was asking in the low $700,000 range. Meanwhile, the agent selling the Hamersley property was asking for offers from $619,000 but during the inspection was pitching closer to $700,000 – well above where our team appraised the property.
Based on our expert appraisal and market knowledge, our client bought the Duncraig property at a price well below our appraisal. The Hamersley property had 103 groups of interested parties view the property in a three-day window and ended up selling for over $700,000 – almost $100,000 above what we considered to be market value.
Location, location, location
Sitting on 721 sqm of land, this established three-bedroom, one bathroom house in Bayswater looks to tick a lot of boxes for investors. The house is well located close to schools and shopping centres, and the nearby Bayswater train station makes for an easy commute into the CBD. The biggest drawcard for potential investors was likely the R25 zoning which, subject to council approval, would have allowed the owners to retain and subdivide into a new rear lot or demolish the existing dwelling to subdivide and build two new side-by-side developments.
60 interested parties viewed the property in one weekend and the selling agent received 15 offers, including three from interstate buyers who were looking to buy sight-unseen. Originally asking for offers from $505,000, the property sold for $625,000 to a local buyer.
What a lot of buyers wouldn’t have realised, especially those from interstate, is that this part of the suburb is exposed to high levels of traffic and noise, an undesirable factor that limits rental and development appeal, and something that made it unsuitable to the needs of our buyer.
With competition in Perth’s property market heating up and with investment grade properties hard to come by, many buyers are rushing into purchases and making costly mistakes that have the potential to harm the longer-term growth of their investment. Our buyer’s agency team are increasingly seeing other parties overpay for properties suffering from factors that will influence growth. For buyers looking to enter the market and take advantage of the strong growth conditions on offer, it is vital that they keep underlying market drivers central during their decision-making process. While stock levels remain low across the metropolitan area, investment grade properties can still be found for buyers with the right search criteria. To speak to our team in more detail about where we are seeing these opportunities, please request a consultation via the following form.