What you don’t know won’t hurt you

Sadly the above applies to property buyers all too often in the investment market. Unless their investment is sold, a potentially bad investment is never realised, and then they never know they have purchased a lemon. Many property developers, property clubs or groups, marketeers and project marketers disguised as the 'buyers best friend', deal in the 'new property market'. As such the property they sell is predominantly sold on the fact it is new, in a potential high growth area and higher sought after by potential tenants. Some of these may be true, but rarely will the planets align for all to become a reality.

Usually built in areas where there is large amounts of vacant land (house and land package), or where the unit bought is 1 of 300 within close proximity to several other buildings of similar size specification. Some of the worst cases I have seen in recent years are properties that have achieved no growth over five years to 2010 and one property that dropped 25% in value over three years to 2010.

Both of the properties given as examples above are in large complexes and primarily owned by investors. The first buyers in many new developments often pay a premium as they are from out of the area and marketing has touched them through a seminar or direct advertising and new developments can have a very large marketing budget. When those buyers want to sell, they are more often than not confined to the local market and that market will not pay the premium. As well as that, and worse still, the development could have been targeted at the investor market, subsequently the owner occupier market do not want to live there and will not buy the product.

The truly sad and unfortunate thing about all of this is that it is totally avoidable. A little advice and common sense and a smart investment can be made and wealth created through that.

 Scott McGeever 19-Dec-2010

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