One of the major dilemmas for property investors is where and what to buy.
“It always surprises advisers how many investors are emotional about their purchases,”
Christian Bartley, Managing Director of Bellarine Property says. “Many people see their investment properties as an extension of their own home and indulge in the same feelings of pride of ownership. They turn down a property with terrific investment potential and strong rental demand just because they themselves couldn’t live in it.”
According to Christian many investors lose out by making heart rather than head decisions about property purchases.
“The strongest demand for both re-sale and rental is usually, by very definition, around the median price in any marketplace or location,” Christian says. “Furthermore the luxury markets are usually the first to be hit by any economic downturn. Much of the luxury rental accommodation can sometimes be leased by corporations who, in poorer economic times, can no longer justify the cost of accommodating employees in high rent areas. And high income earners are unlikely to commit to large mortgages or rents in a climate of economic uncertainty with the possibility that salaries or jobs could be under revision.”
According to Christian, median priced properties – those in what you could call the large mass of the market – are not as badly affected and usually give their owners the best long term return.
“If they lose some demand from their usual occupiers because young people move back home or families scale down to smaller or cheaper accommodation they pick up tenants or purchasers who can no longer afford the luxury markets,” Christian says. “Investors should forget the question “Could I live in it” and instead concentrate on analyzing objective investment criteria.”