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Problematic property clichés

Greville Pabst
5 September 2017

By Greville Pabst

Everyday the news is full of stories on affordability, over-supply and under-supply and the fear of never owning a property. There is desperation to find an affordable property that “gets you in the market” before it is too late.
You would think the pressure, panic and doubt would encourage people to do more research, to be cautious and seek experienced professional advice. Yet surprisingly, many Australians buy property with little or no investigation into the factors that drive individual property performance.
Instead, they base their decision on the assumption or marketeers’ assurances that once you are “in the market” (in other words have bought a property) you are safe - phew! Even second homebuyers tend to fall for the cliché.
Problematic property clichés are overused. Clichés first came to life as jargon, particularly in the property world or on the sports field – sitting on the sidelines, worst house; best street, crunch time, it’s a game of inches, blue sky scenario, etc. Jargon is just clichés in waiting – if we are smart enough not to trust someone who uses jargon then why do we believe the clichés that are all around us. Questioning the validity of property clichés and commonly held assumptions can help both buyers and sellers make better informed decisions when it comes to investing for their future.
Here’s a few clichés that are overused and incorrect:
1. Hot spots: It’s not uncommon for investors and buyers to chase the next big hot spot because they are led to believe this is how a smart buyer makes fast money.
By definition a hot spot is a suburb or area predicted to benefit from rapid short-term gains in value. However, despite an initial spike, a hot spot is usually characterised by slow or limited growth in the long-term that often eventually undermines short-term gain.
Due to the high transactional cost of property investment real estate should be viewed as a long-term proposition, which means hot spots often fail to provide the exceptional growth buyers hope for.
2. Timing is everything: Analysis of historical sales data clearly shows that it isn’t when you buy but what you buy that’s important. Purchasing a property based on price alone is no guarantee of future growth performance. Selecting the right property with the right profile for growth will ensure property owners have an asset that performs irrespective of wider market conditions.
3. Sitting on the sidelines: At auctions, it’s common for buyers to sit back and wait to scope out the competition making assumptions of other buyers’ limits. However, adopting a ‘wait and see’ strategy can be disadvantageous. The reduced competition during the beginning of an auction can appear to stop the property price from rising but really it is just stalling it. Those that have confidence and knowledge about what they are buying and its real value needn’t go to an auction and sit on the sidelines.
If you are serious, you need to bid. Placing the highest bid at auction means that if the property is passed in you will be offered the first right of refusal to negotiate the purchase price. This means that you could secure the property for less than it would ordinarily sell under Private Treaty.
4. Location, Location, Location: The most well-known property cliché, location, is quoted as the quintessential factor when it comes to property selection. But, what many buyers fail to realise is that location is far more than just the right suburb or even the right street – it is as specific as the lot number or position in a block of units.
While neighbouring properties may appear similar in many ways, factors such as aspect, orientation, floor plan and levels of natural light, not to mention security, all have an important impact on property value beyond the underlying land value.

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