Compare a homebuyer’s and an investor’s list of considerations for selecting a property – how different do you think they might be? Many argue these distinct buyer groups have different property selection criteria, apart from a few minor variances. However, I believe they are more similar than not – or at least should be.
There is a strong case for the homebuyer thinking like an investor when it comes to selecting property. A person’s primary residence or home is often the biggest investment asset they will ever own. Therefore, doesn’t it follow that a homebuyer should select a property that provides the best possible capital growth potential, particularly given primary residences are exempt from capital gains tax?
The following is a list of key criteria a savvy investor considers when looking for a property with high capital growth potential. Let’s examine how the same considerations could benefit the homebuyer.
Factors like proximity to schools, a workplace or family may influence suburb selection for homebuyers. But, there are other aspects of location that can impact a property’s long-term capital growth, such as the street in which the property resides. Consider quiet streets with minimal cut-through traffic that offer access to the suburb’s key roads and transport infrastructure, not only by car, but by walking too. Focus the search on streets where houses and gardens are in good repair and there are no couches, discarded car parts or rubbish on nature strips.
Drilling even deeper, consider the location in the street and, if relevant, position in a block of flats – both of which can influence long-term value growth of a property.
Past performance is one of the best indicators of future potential. Unlike investors, homebuyers may not look for properties in suburbs that provide high capital growth rates of seven to nine per cent, however, it’s worthwhile analysing a property’s growth performance history to ensure the growth rate of the property is at least matched to the average of the suburb.
Distance to the village, amenities, transportation.
Most suburbs provide a “village” or shopping strip offering local residents an outlet for coffee, food supplies, a newsagency and take away food, at a minimum. Many suburban villages have developed into sophisticated shopping facilities with trendy cafes, bars and lifestyle shops, in addition to gourmet or organic produce outlets.
Properties within walking distance to the local village will always benefit from higher demand. Though, beware of being too close, as noise pollution, traffic congestion and the food smells wafting over your back fence can be off-putting.
Elements of scarcity
Seeking elements of scarcity in a home refers to aspects or stylistic attributes of a home difficult to replicate. For example, a stunning view from a back deck or lounge, or a period dwelling in Victorian or Art Deco style. Properties with elements of scarcity tend to appreciate and hold their value better over time.
With consideration of the criteria used by investors to select a property with high capital growth potential, homebuyers can not only purchase a home that meets their personal needs and desires, but also one that can achieve growth over the years and help to build their wealth.