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Good opportunities for city home buyers

GOOD opportunities exist for buyers in the inner city housing market, particularly in the upper echelons, according to those watching the industry closely.

Real Estate Institute of WA president and Blackburne Real Estate managing director Graham Joyce said the market was soft for anything over $400,000 and would remain soft for at least the next six months.

“Anything over $400,000 is definitely a buyer’s market without question. Anything between the $250,000 to the $400,000 price range is also starting to firm up. The enquiries are starting to increase,” Mr Joyce said.

Mr Joyce said East Perth developments were struggling a bit, possibly because of an oversupply or a lack of infrastructure and amenities.

Statewest CEO Greg Wall said a cautious approach was needed when deciding to buy an apartment. The decision should not be based on any incentives or tax breaks but rather on what the capital appreciation was likely to be.

He said more inner city developers resorted to pushing the tax benefits and rental guarantees compared with other areas, possibly because inner city apartments were harder to sell.

“If it’s well located, a good size unit, it’s got a good floor plan, then it’s probably alright. If it’s all about depreciation, tax breaks and rental guarantees they are the ones we take a bit more care of,” Mr Wall said.

“People pay a premium on the basis that they are getting a tax break or rental guarantees.

“The inner city seems to be more aligned to these tax breaks, rental guarantees and deprecation issues than other types of properties. We just treat them with a bit more care that’s all.

“It’s the resale and not the short-term tax breaks that need to be looked at. I think the real acid test is after things like the guarantees and the tax holidays – what the re-sale value is.

“There’s a reasonable amount of supply and I guess some of them are having difficulty in moving them on.”

Mr Wall said he was very cautious about the outlook for the inner city market over the next six months.

Inner City Housing Developers Association president Derwent Southern said that the first thing a investor should do when considering a purchase was decide what location best fitted their lifestyle.

“For example, if you want to have an active environment around you, you don’t go and buy a residential unit in West Perth because by six o’clock at night the place is quieter than the back paddock out in Lake Grace,” Mr Southern said.

In terms of the unit itself, Mr Southern said it was important to consider things like storage, security, privacy, room and parking – vital considerations which all fitted the investor’s requirements.

To give further peace of mind, a building inspection could be made, although Mr Southern warns that there are many inspectors who falsely claimed to understand the building requirements of apartment developments when they did not.

“When you are looking at large complexes it gets very difficult. It’s very different from single storage stuff. You are using form work and flooding slabs and interesting things like that,” Mr Southern said.

Probably the best thing an investor could do was to talk to other owner-occupiers and people in the industry to find out how reputable the developer was.

He said one of the things the Association was working on was a Code of Practice for developers to give investors some confidence.

An investor also should find out what the strata fees were, compare them to other developments and make themselves familiar with what they pay for.

Strata fees range from about $300 a quarter to $1,200 and vary depending on the complexity of the units.

If the complex has got a lot of facilities like a gym or a pool then the strata fees will be higher.

The ratio of owner-occupiers in relation to investors also needs to be considered.

“If you have too few owner-occupiers than the pressure is on strata managers to spend as little as possible on maintenance to maximise returns and similarly if you have too many owners then basically they want to over capitalise the maintenance side. So it’s about getting the right balance,” he said.

According to Bob Rossi, registrar of the real estate board at the Ministry of Fair Trading, a lot of the matters are just commonsense.

“Before rushing in and buying it during the day, the buyer should go and visit it at different times to see what it is like on the weekends and at night,” Mr Rossi said.

“Also, and importantly, don’t over commit yourself on the mortgage repayments.”

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