Five reasons why location is crucial for property buyers
REAL estate prices in Australia are moving in all directions, but one factor sits above all others when it comes to longer term price performance.
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“LOCATION, location, location” is a saying that’s been used by countless people over many years when talking about real estate.
It’s been the title of TV shows and has been quoted by people including the world’s richest person and Amazon founder Jeff Bezos and Donald Trump’s ex, businesswoman Ivana Trump.
And now may be the time to give the saying some extra oomph by adding a couple more “locations” to the three already used.
Recent research has found that location of a property is more important than ever when it comes to price growth.
A report this month by Ikea found that almost three quarters of Australians favour smaller homes in a good location over larger homes.
The Ikea Life at Home report also found that half of Australians consider their neighbourhood to be part of their home.
Separate research by Property Investment Professionals of Australia chairman Peter Koulizos, who crunched the numbers on a decade of property price performance across thousands of suburbs, uncovered some interesting location facts.
Homes close to city centres generally did better price wise than other areas, including near the beach, Mr Koulizos found.
And for property investors, choosing the right city was more important than choosing the right suburb, with the worst suburbs in top performing capitals doing better than the best in lower growth cities, he found.
Here are five reasons why location is the most important piece of the property puzzle.
1. LAND RISES, BUILDINGS FALL
The growth portion of real estate is all in the land, which is why investors are allowed to depreciate the declining value of buildings and their contents.
2. BAD LOCATIONS LINGER LIKE BAD SMELLS
The most beautiful home isn’t going to sell if buyers or renters don’t like its location.
Sometimes outside factors turn a boom location bad. Mr Koulizos’s research found that properties in many mining towns are still worth just half as much as what they were a decade ago.
3. BEING IN DEMAND BRINGS BIG PROFITS
If people really want to live in a suburb or town, they will buy there no matter what.
Even the dodgiest house can be knocked down and replaced with one or more new homes on the same spot of land.
4. SCHOOLS AND SAFETY
How many times have we heard about people moving to a suburb so their kids can go to a desired school? That’s location in action, and pushes up property prices.
Community safety is another location factor. If a neighbourhood isn’t safe it’s not going to attract buyers or renters.
5. DRILL DEEPER THAN A SUBURB
Different neighbourhoods within a suburb can have different levels of demand, and a great location can sometimes be measured at street level — or even where a house sits in a particular street.
Views, traffic flows and proximity to positive and negative features and other properties all form part of the puzzle in which location is real estate’s number one factor, five times over.
Originally published as Five reasons why location is crucial for property buyers