Buying Property For Dummies Page 7
Mod cons: Dishwashers, European appliances, central heating and cooling systems, security alarms and smart new bathrooms add to the comfort and pleasure of your home. But are they the criteria by which you measure the desirability of a home?
You can work out roughly the cost of putting any of these features into a home that doesn’t have them already, to see whether buying a home that offers many other desirable features is more worthwhile.
Number of bedrooms: A single person or couple can theoretically live with just one bedroom, but an extra bedroom or two can give you space for a study, a home gym/theatre, or somewhere for your cousin to stay. Depending on how long you plan to stay in the home, you might also like to plan ahead for children.
Off-street parking/garage: Having the option of off-street parking, even if the space is just a private driveway, can add several thousand dollars to the price of homes in some inner-city areas. If on-street parking is easily available, this facility may be something you can live without. If you’re looking in suburbs and country areas, the choice may be whether you want a lock-up garage or not, and how big.
Period home or something more modern: Buying a home that has age and character can raise challenges not every one is keen to take on (see Chapter 6), but some people wouldn’t dream of buying anything else. Evidence suggests that period homes grow in value faster than more modern homes. You may, however, prefer the cleaner lines and often more logical floor plans of a modern home, or even choose to buy something brand new (see Chapter 8).
Pools, spas and other luxuries: Pools and spas, and even tennis courts, never seem to add quite as much to the price of a home as they cost to build in the first place, so don’t discount a potential property as out of your price range just because it has any of these facilities. Remember, though, that you may have to compromise with the loss of garden space — for example, in the case of a pool or tennis court — plus the extra costs in maintaining the facility. In an apartment or unit development, amenities like pools and gyms add to your annual body corporate or owners’ corporation fees (fees that cover the costs of common property facilities that are available to everyone in the development to make use of; for example, garden areas or a swimming pool), so make sure you really intend to use them or you may come to resent the extra costs.
Position to the sun: Australian architects and home designers now incorporate the way the sun shines into homes and gardens. Here’s how a home’s aspect benefits from the sun and light:
• North-facing living areas filled with sunlight in winter (but without the full blaze of sun in summer) are ideal.
• East-facing homes get morning light.
• West-facing homes get hot, direct sun in summer unless screened in some way (look for awnings or summer foliage).
• South-facing homes or gardens are in shade most of the time in winter.
If you like to entertain outdoors, you may prefer a north- or west-facing garden. However, you may be willing to settle for an easterly or southerly aspect as a good trade-off for some other more important feature.
Renovator’s dream: Some people thrive on the challenge of completely remodelling a home. Others couldn’t think of anything worse than living in chaos for months, and getting out the tools and paintbrushes every spare moment. A home that requires a bit of work may be more affordable than one that has been freshly made over, but if it requires major structural work to be liveable, make sure that you and whoever you’re buying with are up to the task.
Storage areas: Talk to any disgruntled home owner and one of the biggest sources of complaint is often a lack of storage space. You may want storage for clothing and books, kitchenware, camping or sporting gear and garden equipment. You can always buy wardrobes, shelves and even a shed, but you may want to check that any home you look at has the space to fit in these hideaways.
Views: I grew up with a fabulous view looking out over Hobart’s Mount Wellington, the Derwent River and the Tasman Bridge, and when I moved to Melbourne I was shocked to realise that very few people had any kind of view. A view, whether of water, mountains, a forest or park, or even the city lights, is a wonderful bonus. If you can afford a home with a view, such an asset ensures your property always keeps its value. But, again, a view is one of those factors you may need to use as a trade-off to get the kind of house or the location you have your heart set on.
Table 3-1 presents one way to collect your thoughts when making your checklist of must haves, like to haves and mustn’t haves for your dream home.
Trading Off Location against the Perfect Home
As soon as you work out the features you’re looking for in your ideal property, you’re better able to know whether you’re going to have to trade off the location you prefer against the style of home you like. This decision making is very personal. For instance, initially you may look for a large spacious house with a big backyard. But, soon, you realise that to get that space you have to move a long way from friends, your children’s school and the inner-city life you’re used to. Eventually, you decide to stay near your community, which more than compensates for the smaller house and yard you settle for.
In another scenario, you may make the opposite decision and move a couple of suburbs out and be happy for the extra living and outdoor space that the home provides for the children.
If you’re determined to live in a particular location, you may want to look for properties that are a bit run down or have some other flaw — a location next to a big block of flats, perhaps — that makes them less desirable to others and, therefore, lower in price.
You can usually change something about the property itself by renovating or landscaping or even knocking it down and starting again. A flaw in the location is a lot harder to come to terms with. For instance, you can screen the noise from a busy road with a high wall and double glazing. But your location next to an electricity substation is more difficult to remedy. Always take into account the effect of these external factors on the future re-sale value of your home.
Spotting up-and-coming suburbs
You may have your heart set on a particular suburb. But, if that suburb is beyond your price range, why not look one or two suburbs farther afield? You’re certainly not alone. First home buyers have always had to strike out to new frontiers, and as long as you look astutely, your chosen suburb can be a good investment decision. Many suburbs once considered ‘off the radar’ are now considered ‘sought-after’. Consider suburbs like Brunswick in Melbourne’s north or Newtown in Sydney’s inner west. People who bought in these suburbs ten years ago or so are doing very well indeed. And the suburbs have flourished around them, becoming more attractive with interesting shops and cafes, and better facilities.
Drive around and see how many houses in a suburb are being renovated. Apart from increasing the aesthetic value of the area, renovations are a good indication of how optimistic owners are about the value of their homes increasing. Also, look at the kinds of shops and cafes that are opening up in a suburb. Suburbs that are close to public transport, freeways (but not too close), universities or a good shopping area are likely to hold or increase their value. Contact the council and ask if any planning proposals are on the agenda.
Moving to the fringes
The fringes of Australia’s cities are expanding every month as land becomes available to new housing estates. In these places, you can buy newly (or recently) built homes with all the mod cons for much less than the price of similar properties closer to the city. Some developers even offer terms that mean you don’t have to come up with a full deposit (although watch out for catches in these kinds of arrangements, as Chapter 8 outlines). These estates can be ideal for young families, or those planning them, because they’re often full of children and facilities catering to their needs. These areas also often offer the added attraction of proximity to the countryside, with its fresh air and opportunities for outdoor activities.
New housing estates can often lack access to public trans
port, shopping centres, medical facilities and facilities for teenagers — including secondary schools and sporting facilities. Before you buy into a housing estate, check that it has the kinds of facilities you and your family need, or that it has plans to build them in the future. Public transport is especially important. Without it, you and your family are completely reliant on the family car.
Buying into a new house-and-land package estate isn’t always the best investment decision. The value of a property is related to the rarity value — that is, the rarity of the land it stands on, which is why inner-city properties and waterfront properties cost so much. You can’t build more land in the inner city and water frontages are finite spaces. By their nature, outer suburban housing estates can be replicated, a factor that undermines the re-sale value of any one property.
In terms of eventual re-sale value, best buys in housing estates are those that have a unique characteristic — being adjacent to a golf course or national park, for instance. You can also financially do better on an estate that has easy freeway access or public transport into the city. An individual property that is next to a lake or park, or a short walk from shops, may be easier to sell down the years as well.
Escaping to the country
Newspaper articles regularly cover people who have left the city to move to a coastal or country town or onto a rural property. The stories talk of the fresh air, the animals and the beautiful country vistas, the friendliness of the local community — and the size of the new country abode bought with the sale price of the city home.
‘Sea-changing’ — and its rural counterpart ‘tree-changing’ — are growing trends in Australia, especially for people who have retired from the workforce or who have worked out a way of being able to work mostly from their rural home. If you’re in that position, you may well be able to find a property that has all the space, land and features you dream of, at a fraction of the price of a similar property in the city.
Where should you look? You may be considering areas you already have a connection with, perhaps through family or friends who have already made the move. Tune in to their much-needed information on whether the area is likely to be one that is going to provide you with the facilities you’re looking for on a day-to-day basis. Otherwise, do your research by driving around different regions, checking the For Sale ads in the local real estate agents and reading any independent market information you can find about an area.
You can get a sense of how an area has been growing in value (or not) and even get a sense of who lives there by accessing free information available online. Home Price Guide (www.homepriceguide.com.au), RP Data and www.realestate.com.au all offer access to basic median price, growth and demographic information on many country towns around the country. For a fee, all of these services also offer more in-depth research reports, which give you detailed information on recent sales in particular streets or even on a particular property.
Properties in most coastal and country areas had big rises in value in the early 2000s, but for years before that many areas barely moved in price, and many areas have done little since. Those regions that are more likely to hold or increase their value over the next few years are those within two hours’ drive of a major city centre, with easy access via freeways and increasingly, public transport, and that are close to beaches or places of great natural beauty.
Be careful not to buy into an area just because it grew strongly in price over the past few years. Last year’s great investment strategy isn’t necessarily going to be repeated this year, or the next.
Going high rise
Apart from Sydney, high-rise apartment living is a relatively new lifestyle choice for Australians. Australians have traditionally liked their backyards, even if it’s just a plot of concrete, and haven’t liked to live too high off the ground. But, for better or for worse, urban planning now caters for living in multi-unit, high-rise developments, convincing many Australians that this option is a glamorous choice.
Certain advantages come with living in a high-rise apartment block. Apart from the potential for spectacular views, many newer developments are beautifully fitted out with all the mod cons. Some also offer amenities like pools, gyms and cafes, as well as the benefits of a concierge and security systems.
Indeed, given the prices of houses in some parts of the major capital cities, an apartment is the only option many people have for owning a home. Certainly, if you can’t afford anything other than a tiny, run-down dump in the inner city or a bigger property way out of town, an inner-city apartment may seem like a gift from heaven.
Don’t expect your apartment purchase to always be a great investment decision. As with outer suburban housing estates, the problem with high-rise apartments is that they’re in good supply and it isn’t that hard to build more. Which means that, by the time you come to sell yours, you may well be competing with other apartments that are newer and fancier. Apartments also have a low land to value ratio.
Land to value ratio is an indicator of the proportion of the total value of your property that can be attributed to its land value. Because land appreciates, while buildings depreciate, the higher the land to value ratio the better. The land to value ratio on a freestanding house in some highly desirable inner-city areas can be as high as 80 per cent (or, in other words, on a $1 million property, the land is valued at $800,000). With apartments, the land to value ratio is arrived at by dividing the value of the land on which the block is built by the number of apartments on that block. So if there are 50 apartments, the land to value ratio for one apartment is a 50th of the value of the land. That means you can’t rely as much on the rise in the value of the land to boost the value of your apartment in the long run. Smaller blocks of, say, four to six apartments have a much higher land to value ratio, so can be expected to increase in value over time more than multi-unit developments.
To maximise the opportunity for your apartment to hold or increase its value, look for one with scarcity value.
To improve the scarcity value of your apartment
Choose a good location — across from a beach or park, or near an interesting shopping area.
Choose one with a view if possible, but make sure that the view can’t be built out, or you may end up looking at another apartment building.
Look for a good design and floor plan. Avoid low ceilings and poky rooms. The input of a known designer can help with the value.
Living out-of-season
You may experience a particular temptation to move into an area where you’ve enjoyed your summer holidays. Living in the off-season in a coastal getaway or rural paradise can be quite different when the tourists have gone home and many of the cafes and shops have closed their doors. Are local doctors, supermarkets, banks and other kinds of facilities that you’re going to need when you’re living there always available? If you have a family or are planning one, you might also like to check the local schools and other facilities, such as sporting facilities.
Chapter 4
Dealing with Property Professionals
In This Chapter
Dealing with real estate agents
Making the initial offer
Using a buyers’ agent
Getting a feel for what real estate agents and buyers’ agents are allowed to do
Almost every property transaction in Australia involves a real estate professional. Occasionally, though, a property is sold privately, without any agent being involved. If you see a property you like in a newspaper or on a property website, nine times out of ten you need to contact the real estate agent handling it in order to get more information, organise an inspection and put in an offer.
In this chapter, I look at how real estate agents work, how to recognise a good agent and how to get one on side to help you in your search for your dream home. I also look at the growing trend for using buyers’ agents to help find a property and negotiate a sale without you ever having to talk to a real estate agent yourself.
; Working with Real Estate Agents
Rightly or wrongly, real estate agents don’t have a great reputation in Australia. But that’s not to say they’re all bad. Agents are salespeople, and salespeople do what they can to get a sale. The good ones do so by earning your trust, giving you the information you need and following through on their promises; the poor ones can be either lazy, incompetent or, at worst, underhand in their efforts to make a sale.
Dealing with a real estate agent you can trust means checking that your agent is a member of the Real Estate Institute of Australia (REIA) in your state or territory. Members of the REIA are committed to providing a service with professional standards, and they follow a strict code of conduct. REIA members can also undertake a wide range of professional development opportunities, which enable them to continually update their skills and service. The quickest and easiest way to check out your agent is to visit the REIA website at www.reia.com.au You can also phone them on 02 6282 4277.