What you buy more important than what you pay for real estate, says Gavin Hegney

Gavin Hegney.
Gavin Hegney.

WHEN it comes to real estate, it is not what you pay but what you buy, according to Gavin Hegney Property director Gavin Hegney.

Speaking last week at the annual Western Suburbs Business Association Property Market Update dinner, he used two examples from 1983 to make his point.

The first was a four-bedroom Armadale home with a pool in a quiet cul-de-sac priced at $47,500 and a “bargain-priced” $45,000 character home in South Perth, most likely on an 800sq m block.

He said while character homes in South Perth were not in demand at the time, this would have been the better buy.

The second example included two homes for sale in Inglewood.

One was an old, two-bedroom character home most likely on a quarter-acre block close to shops and priced at $46,950.

The other was a “luxury” two-bedroom villa in a complex of eight priced at $45,750.

At the time, homes near shops were discounted because the location held little appeal, yet it would have been the better investment.

Mr Hegney said these examples showed you had to buy the right property and let time do the work.

“Over time, land tends to appreciate in value and buildings tend to depreciate, all things being equal,” he said.

“Land becomes your asset, buildings your liability.”

Mr Hegney said if you wanted to be a successful investor all you really needed to do was buy 50-year-old homes.

“Clothes have a one-year fashion cycle, buildings have a 10-year fashion cycle, but over the longer term buildings at about 50 years old become timeless and re-appreciate, which is why we’re seeing a lot of the sixties homes in fashion now,” he said.

“What you buy is far more important than what you pay and over time, pick the right ones and you’re doing extremely well.”

Mr Hegney said areas and trends worth paying attention to over time included the Ocean Reef marina.

“If you put a marina into an area, history says values go up,” he said.

Mr Hegney expected the Scarborough beachfront to become one of Perth’s top tourist destinations when complete and the area to create its own demand over time.

He also indentified the Northbridge precinct.

“Yagan’s Square will reshape Perth as Elizabeth Quay has reshaped Perth,” he said.

“Northbridge could become like Paddington was to Sydney many years ago.”

Fremantle was another place to watch.

“It’s really going to go from strength to strength over time,” Mr Hegney said.

“There’s going to be some good opportunities, but remember the Inglewood story, let’s not just go buy in Fremantle for the sake of buying in Fremantle; buy the right thing and right location.”

Mr Hegney said investment success was not about location, location, location, but location, position and timing.

Other trends to watch were Metronet and the density/zoning around train stations where a lot of older 1970/80s homes on large blocks could be split up into a number of apartments.

“That rezoning adds value,” Hegney said.

“Make the most of that infrastructure; you’re going to see a beautification of the area, lift in values and that amenity.”

Forrestfield, Redcliffe and Bayswater train stations were good examples, according to Mr Hegney.

Values in these areas were down 20 to 30 per cent over the past two years.

Mr Hegney said development sites had taken a beating in the downturn, but tended to recover quite sharply when the market turned.

“It will turn, markets will always turn and when it does, development sites will come back into vogue,” he said.

Survey strata and duplex sites also offered opportunities in all areas.

In terms of market recovery, Mr Hegney said it was important to remember that all markets were different; the bottom of the market was yet to come in some areas and had passed in others.

“The inner areas are recovering, the investment market is yet to bottom as is the new build market,” he said.

“The rental market is still over-supplied, but velocity is up.”

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