At Your Australian Property we usually recommend to our clients to consider purchasing properties which provide long-term and sustainable high capital growth potential, depending on their requirements. We also represent many different clients who are up-sizing, downsizing or investing in property. However, for buyers looking to purchase a home to live in, the property also represents a capital growth investment vehicle too as it assists in building wealth.
Your Australian Property will usually recommend its investor clients to purchase in established areas (usually within 30 KM from the Melbourne CBD) which are either blue chip or located in a high growth corridor with access to great infrastructure and amenities.
We very rarely recommend buying off the plan or buying properties in remote areas for these reasons indicated below:
- Stamp duty savings are misleading as the developers or builders factor these savings into their price.
- Deposit monies may sit in the Developer’s trust account for up to two years while the property/complex is being completed – opportunity cost.
- Completed property does not look exactly like what was seen in the brochures, internet or in show-room.
- New properties take many years to appreciate in value when you buy off the plan. If you need to sell soon after completion, generally you cannot sell for the price you paid.
- If it’s a rental investment – there could be anywhere from 50 to 200 properties at any one time being rented out. So it can be ‘a race to the bottom’ to see who can rent out their property first at the cheapest price in order to get a tenant first.
- Capital appreciation is based on comparable properties within the same complex. This puts a massive price ceiling on the investor’s. We have also seen many new properties either purchased off-the-plan or newly built in remote areas lose considerable value for the investor!
- No sales history with new properties or off-the-plan properties – presents a major risk to the investor as there is no history showing past capital growth!
- Claiming tax depreciation on buildings can also be very misleading, especially when it comes time to selling the property which is often out of your control due to unexpected circumstances. See, the depreciation costs which have been previously claimed is subtracted from the original purchase price. Effectively, this means the investor pays a significantly higher capital gains tax (CGT) than what they ordinarily would have paid if they had instead purchased an established property.