Despite all the attention paid to whether investors are investing too much money in new apartments, established real estate still dominates residential real estate investment transactions. . ABS data consistently shows that only around 10% of investment loans are committed for new buildings.
This, of course, is mainly due to the supply of old inventory – which has built up over decades – which is slowing the growth of luxury condos and suburban housing estates. But it also reflects the long-term needs of tenants – the landlord’s customers – for old-fashioned homes.
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Most of these funds are used for private houses and traditional apartments. But there are a whole host of other old-fashioned properties: namely, old villas, townhouses and warehouses. Is it worth the investment?
The villas appeared on the cityscape en masse in the 1960s. Apparently they were targeting aging Australians (though the term downsizing isn’t given) used in the 1960s, who don’t want – or can’t. – move to an apartment. With no stairs, the property includes private land as well as shared properties for spacious walkways.
Today, villas are often considered by owner-occupiers or investors, whose budgets may not extend to a house, but who are not apartment-loving. And it is true that villa prices often fall at a point of view between the prices required for apartments and houses
found in the same area.
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Villas are also rare and no longer built, at least in the old suburbs. Their construction worked commercially at a time when land values were much lower. Today, a developer will use the land much more deeply. This comparative scarcity is positive for investors.
‘Site-contested’ However, villas are often ‘site-contested’. They tend to be found in mid-size suburbs which often underperform suburbs in terms of capital growth.
Some villas work well as an investment, but many others do not. This inconsistency makes selection difficult and should only be addressed by experienced investors.
Townhouses are found all over our cities, including in the great suburbs, often in pairs of streets on the site where an old cottage with two facades stood. . Two and sometimes three stories high, they offer more accommodation for a single person than traditional cabins, while cramming onto reasonable land, possibly on a high-value property. And there are examples that are over 30 years old now, so you can judge by the history of price growth.
What don’t you like? Well, the land makeup is less than a typical single-fronted chalet, so most of the capital costs are spent on improvements – which depreciate over time – rather than dirt, engines. of capital growth. This definitely compromises the return.
In addition, townhouses are not a scarce resource. They are under construction all the time. So even though there is a huge demand for them, the supply continues to grow. And there is also a question of uneven quality. Some are built to very high standards, but some builders have saved money. As a result, the return on investments varies considerably.
A converted barn can be a great investment when the property is located in a busy inner suburb and the conversion meets the general expectations of barn living: large rooms with original features like exposed brick walls and beamed ceilings. It’s the mix of industrial heritage and modern, open-concept living that sets the tone.
But the pattern was broken when the developers filled the interior of several apartments divided by conventional plaster walls. Unfortunately, the latter approach is slowly dominating the field.
So navigate carefully between these “alternative” types of real estate investments. The old is often better than the new in real estate investing, but some can still be your ruins.
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