The secret to achieving value and ensuring long term profits in today’s buoyant market is really matter of leaving out the emotion and applying a simple but critical formula, according to Geoff Baldwin, MD Geoff Baldwin.com Realty Group.
“With the market running hot since 2005 and now again picking up strong momentum after the normal Christmas lull, buyers need to apply the disciplined rules of the experienced investor if they are to achieve value and scope for short to medium term capital growth, Mr Baldwin said.
“Although Western Australia has experienced enormous growth over the past few years, that growth is projected to continue in the medium term, albeit at a more moderate rate.
“Recently released REIWA figures for the 2006 calendar show that the majority of suburbs/areas well and truly outperformed the 5 year average of 18.5% and also the 2006 average of 31.1%.
“The secret is to buy in good areas that have been significantly outperformed by the market in general e.g. below the 31.1% and also as close to or below the annual average market increase for the past 5 years of 18.5% whilst avoiding those above these marks.
“To qualify, these underperforming areas will have maximum scope for increases while still fitting all the normal criteria such as proximity to amenities and infrastructure but not having any obvious detriments such as being too close to heavy industry, pollution etc.
“Another critical indictor is that the performances of surrounding areas/suburbs has been positive and have significantly outstripped the area/suburb in consideration.
“An example of 8 areas that should be considered now are:
• South Yunderup - 14% in 2006 and averaging 18%. With the new southern freeway to pass within minutes of this hidden riverside treasure, it represents great value and will soon genuinely become an outer suburb (Average house price $540,000)
• Baldivis - 21.9% in 2006 and averaging 13.9%. Huge potential but still with a country flavour. (Average house price $445,000)
• Burns Beach – 12% and 14.7%. Beach side suburb surrounded with booming suburbs on all sides. (Average house price $549,000)
• Daglish – 0.7% and 11.8%. Near city and surrounded by high priced suburbs. (Average price $632,000)
• East Perth – 24.9% and 12.1%. High class inner suburb on the river with much to offer. (Average house price $840,000)
• North Fremantle – 7.1% and 16.5%. This area has huge appeal for all lifestyles and ages. Amenity and infrastructure rich. (Average price $750,000)
• Upper Swan – 15.6 and 18%. Rural flavour while still being close to city. (Average house price $400,000)
• West Leederville – 13.4% and 18%. Another close to city suburb with wonderful access to transport, infrastructure and amenities. (Average house price $820,000)
“Buyers should concentrate on locating suitable properties below the average prices, in these and other high potential but recently underperforming areas. By doing so they will maximise their chances of enuring capital growth in the short to medium term”, he said.