AVOIDING THE POST-BOOM PROPERTY LEMONS

5th July 2006

With a change in Perth's property cycle looming, investors need to play it smart or risk ending up with a costly real estate dud, according to Subiaco buyers' agent Trevor Dunkley.

The Director of Property Wizards Buyer's Agency said, historically, a move out of a boom period could prove dangerous for investors.

"During the good times, people often believe whatever they touch will turn to gold, but that sort of thinking can leave you with a lemon once the cycle turns," he said.

"While there's no crystal ball to tell us when it will happen, Perth's property market will inevitably shift down a gear.

"When that occurs those people who haven't chosen well in the boom time are likely to get hurt."

But Mr Dunkley said it was possible for investors to ensure they didn't get caught out.

"Buyers need to look for what we're calling "boom-proof" properties - which are first class investments that will perform whether the market rains, hails or shines."

He said securing a boom-proof investment meant:

" Picking properties with unique qualities that can't be easily replicated. i.e. coastal or river locations. These will grow more in value because supply is limited and demand is high.

" Looking for properties that are close to shops, transport hubs, parks, medical facilities, day care and schools. These will be more attractive to tenants.

" Selecting properties where the land vs building ratio was 70:30. That is, where the total value is weighted as 70% land, 30% building or better.

" Assessing the likely capital growth for the suburb taking into account future plans & upgrades for the area, and infrastructure changes e.g. roads, highways, railway stations, bus routes.

" Seeking advice from professionals who study market trends from the buyer's point of view, not the seller's.

" Search for properties with development potential.

Mr Dunkley said based on historical growth patterns in Perth, only 1 in 5 properties were likely to achieve growth of more than 10% a year following the boom.

In the 15 years to December 2002, about half of the suburbs in Perth experienced growth of between three and eight per cent - and only one in five averaged annual growth of more than 10 per cent," he said.

For more information, please contact
Mr Trevor Dunkley
Director
Property Wizards
trevor@propertywizards.com.au
Tel: (08) 9381 7450