April 2015 - Finding Pockets of Value
By Rich Harvey, Managing Director propertybuyer
How do you find a value pocket and what are the fundamental questions to ask when you find a value pocket to ensure you do not pay too much? Find out below and be sure to also check out my most recent blogs and client stories.
In this edition we look at:
- Finding Pockets of Value
- Client Stories
- Suburb Spotlight - Woolloomooloo
1. Finding Pockets of Value
In any suburb there is a market within a market. There are streets which are more highly sort after by real estate buyers because of their proximity to the local shops, a great school, waterways, cafes, parks or some other feature that makes it very attractive to home buyers.
Properties in these pockets always hold their value very well and are much easier to sell in a cool or moderate market. They appeal to a wide variety of buyers and are in higher demand throughout the property cycle.
In the Sydney real estate market you could probably sell a flea on a dog as it is so competitive. However, think about what happens when the market inevitably cools you don’t want to be left holding a sub-standard property that you can’t sell in a slower market (or a property that does not appreciate in value like the majority of the suburb).
How do you find Value Pockets?
Identifying if these value pockets exist is the first step. Look at the historical sales data for a suburb for at least 2 years back to see the difference between the highest and lowest sale prices for the same types of properties – eg. Compare three bedroom houses to other three bedroom houses or compare two bed units over the same time period. Don’t compare units with houses. Check which zones and streets are getting higher value results. This analysis will show you the “value gap” available in the local market. Typically, the further from amenities the lower the price (there are exceptions of course) and the closer the property to these features, the higher the price.
Next, talk to local agents and ask them lots of questions about the area. Ask them which streets they believe are the most desirable, what key features home buyers are looking for and which pockets are the most tightly held. Agents may refer to these value pockets as the “golden triangle” (even though it may be just two streets or a rectangle!). While a selling agent may give you some insights into a local area, our team of buyers’ agents have exceptional local knowledge to help our clients locate their next home with ease.
Two fundamental questions you should ask are:
- How much of a premium should you pay for these pockets of value, and
- Are they a good long term investment?
Good quality real estate is all about position. Once you have bought the land you can’t pick it up and move somewhere else. So in order to buy property in the value pockets you need to have deeper pockets than the average buyer. These properties are typically sold at a premium to the rest of the suburb in order of 5% to 25% or more above average median prices. And as for capital growth, just ask the owners of those properties that are still sitting on very healthy capital gains over the past decades they have lived there. As long as you are prepared to hold for the medium to long term, they are an excellent investment. In addition to this don’t forget your principal place of residence is capital gains tax free.
These value pockets contain those houses and apartments where the maxim of the worst house in the best street holds true. It’s a little known secret that many real estate agents reside in such pockets. They often contain a multitude of opportunities to buy and renovate and add significant value. Renovated or knock down rebuild houses also attract premium buyers that don’t have the patience to go through the rigmarole of getting council approvals and dealing with builders.
Where are they?
In the Eastern suburbs, there’s magical harbour views from Yarranabbe Road, Darling Point or enjoy the most incredible iconic views from Wolseley Road Point Piper to the Opera House and Harbour Bridge. Point Piper also has the most expensive real estate in Sydney because of its views and luxury mansions for Sydney’s elite.
On Sydney’s Northern Beaches near Manly, one of the best value pockets is North Manly around Lakeside Crescent, Palm Avenue and Riverview Parade. Bounded by Manly Lagoon and a walk to the beach, yet away from the very busy parts of Manly, this is a high demand area.
The Lower North Shore contains beautiful Balmoral homes to a golden triangle of fabulous streets including Hopetoun Avenue, Burran Avenue and Kirkoswald Avenue. Bring a fat cheque book for these streets with many sales above $10 million.
The Inner West has many trendy and sort-after pockets. Streets surrounding Alexandria Park such as Buckland Street, Park Road, Belmont Street and Lawrence Street contain some lovely townhouses, terraces and apartments. Slide across to Erskineville and Newtown within walking distance to Sydney Uni is a golden area too. Surry Hills / Redfern with easy access to Central Station and the southern parts of the CBD has always proved an historical winner for home buyers and investors.
There’s many more to describe but it’s best to talk to one of our local buyers' agents who can help you identify many hidden pockets of value.
Please contact us today on +61 2 9975 3311 or email your wishlist to engage our buyers agents to give you the edge in this competitive market and avoid the constant frustration of missing out.
Rich Harvey is founder and Managing Director of www.propertybuyer.com.au, Australia's most awarded Buyers' Advocates. Propertybuyer helps property investors and home buyers search and negotiate the right property at the right price, everytime. Visit www.propertybuyer.com.au or call 1300 655 615.
2. Client Stories
Clare & Russell's Story
"The professional approach gave us assurance..."
Buyer type: Investor
Buyer’s Brief: Commercial
To purchase a commercial office returning good yield in a safe area. We felt the time it would take to undertake the search for an office and understand the market to determine the price was daunting. Our main fears about our property search was that the time it would take we would not be able to juggle our other jobs and commitments and consequently we could make a rushed uninformed decision.
The professional approach gave us assurance that every aspect of the property would be identified. Afterwards we felt satisfied that we had purchased a property that “ticked the boxes”. I would strongly recommend that anyone in a similar position to us should engaged a professional such as propertybuyer.
“I would strongly recommend that anyone in a similar position to us should engage a professional such as propertybuyer “
Russell B. & Clare H., Company Directors
Buyer’s Advocate, Kevin Mason
We purchased a commercial property in a blue-chip prime location complete with existing long term tenants. The vendors originally sat on their price of $800,000 but we were patient and unemotional and this paid off and we were able to secure the property for $30,000 less at $770,000 which provided an 8% yield.
"Happy to recommend propertybuyer."
Buyer type: Investor
Buyer’s Brief: Expats living in Hong Kong looking to purchase an investment in Sydney. Main focus is capital appreciation whilst overseas
We live overseas and were looking for a property to hold for the next 5-10 years. The goal was low maintenance, easy to tenant and strong value appreciation over the next 5-10 years. We did not consider doing the search ourselves as we live overseas and have previously had a good experience using a buyer’s advocate in Melbourne. Our main concern was that our needs & goals would not be understood.
We were initially thinking about Sydney however propertybuyer suggested that we also consider Brisbane which showed they were thinking about our goals rather than preferences. Stewart (our propertybuyer advocate) is also very knowledgeable about the process, has the right contacts to progress the purchase and was very accommodating to our questions & requests. Stewart (our propertybuyer advocate) was very knowledgeable about the property, area, process and relevant contacts. Happy to recommend propertybuyer.
“…has the right contacts to progress the purchase.”
Timon T., Insurance Executive