Buying no property can be just as bad as buying the wrong property. I sadly learned this the hard way.
By Lauren Day
I’m a born and bred Sutherland Shire lass and I’ve always loved my original home city of Sydney. Every time I see the Harbour Bridge, it literally takes my breath away and every time I land at Sydney Airport, I instantly feel happier. It has simply always been this way and probably always will be.
Early last year, my husband and I were deciding how best to utilise some equity and during that time, I started an online search for properties for sale in Sydney. I also looked at other locations and in the end, we stuck to a regional Queensland pad.
Like many thousands of investors, I’m sure, I’m now kicking myself just about every day for not buying in Sydney 18 months ago (at exactly the same time we bought in Queensland). Some of the properties I was looking at would have made huge gains and here are some perfect, and yes, heartbreaking, examples.
The $185,000 mistake
Okay folks, this one hurts. I had been looking at apartments on the Lower North Shore, an area I have always aspired to live in and hope to retire in one day. This apartment came up on the radar and it was something I briefly considered, albeit sadly, not seriously at the time. It seemed like “too much money” at the time and even then, I was concerned about holding costs, as I’ve never been a big fan of paying owners corp or body corp fees. This property ended up selling for $745,000 in May, 2013.
Just last week in June, 2014, another almost identical apartment sold in the same building. Similar outlook and view, similar in style. The apartment last week sold for $930,000.
This is my $185,000 mistake. The opportunity cost of holding back has been enormous, as we all know how hard it is to save $18,500, let alone $185,000. It’s incredible to think that in just 12 to 18 months, the value of a well-located apartment in the blue-chip suburb of Mosman increased by an incredible $185,000 in this particular block.
It’s also further evidence perhaps that “blue-chip is best” and in a hot market, buyers and investors will compete for property with a better outlook and location. I suspect they might have paid too much for this apartment but that’s what happens in a boom. The fear of missing out sets in and buyers will pay whatever they need to, in order to ‘get in’. It also helps set the platform for all the other properties in the suburb. Now, if you spend $745,000 on an apartment, you’d get an entry-level apartment in Mosman with no views and probably no parking. Just 18 months ago, that same amount would’ve given you an apartment in an unbeatable location.
It hurts to say I’ve found many examples of this. Being a property lover, I constantly check my favourite websites and so I always see comparisons and changes in the market.
I also thought about this studio, but apparently, studios don’t get much capital growth. It sold for $355,000 in late 2012.
More than 18 months on, a studio apartment on the Lower North Shore with views will now set you back more than $500,000.
The worst part about this one is that the cheaper studio would’ve actually been close to neutrally geared and easy to hold.
And another example, which isn’t as recent, is this community-titled unit, which sold for $625,000.
A very similar property sold for $765,000 in October last year, when the market was already rising.
What I’ve learned
These few examples show the unfortunate cost of not being in the property game. Buying in a second location has cost me opportunity and that’s an opportunity I’ll make sure never happens again. Over the years, we’ve done many stories on hotspotting and trying to find the next best areas. But the booms and busts I’ve watched in this short time have proved that desirable inner-city locations almost always outperform the market and never really lose value.
They might cost a lot more to get into, but in the boom like the one we’ve witnessed in Sydney, people will also compete much harder to get into these areas and prices can suddenly go through the roof. No one has a crystal ball unfortunately, but I think a good old ‘set and forget’ older-style pad is probably something I’ll be looking for next time.
It might take years to ‘catch up’ from this Sydney boom but the good news is, there are so many cycles until retirement. Both Brisbane and Adelaide are now picking up and outer Sydney areas such as the Blue Mountains are also gaining momentum. These parts of the world are still quite affordable, in comparison to the blue-chip areas of Sydney at least. There will be market peaks and troughs but I don’t think it’s ever too late to ‘get in’ to the property market.
It’s also a perfect example of why you should always buy counter-cyclical and buy when you can afford to. Those who waited 12 or 18 months are now having to spend at least $100,000 more on an apartment on the Lower North Shore. But it’s better to be in the game than miss out altogether, right?
What are your thoughts? Do you share a similar experience of ‘the one that got away?’ We’d love to hear your story!
Lauren Day is the deputy editor the Australian Property Investor magazine www.apimagazine.com.au