Understanding Value

Posted by Dominic Cavagnino

As an investor your ability to distinguish between good value and cheap property can be instrumental in your property selection. Understanding value is vital in purchasing the right property which in-turn can help to maximise your exit strategy and potential capital appreciation. Our research model is in place to ensure our property approval process acknowledges high quality properties which justifiably have a premium price.

Let’s use an example which can be compared to our current approved project, Victoria & Vine, Collingwood (Property Two).

Property One
307D/21 Robert Street, Collingwood VIC 3066
Sale Price: $435,000
Sale Date: 25^th July 2018
Details: 1 bedroom, 1 bathroom, 1 car space

Property Two
1113/1-57 Wellington Street, Collingwood
Sale Price: $517,000
Sale Date: Current
Details: 1 bedroom, 1 bathroom, 1 car space

On face value, Property One presents a superior investment opportunity because of price, however a deeper look into both tells us a very different story. Here are some of the key attributes which we assess to distinguish between cheap property and good value.

Size:

Property One has an internal area of 40.5sqm as opposed to Property Two with an internal area of 50sqm. In an apartment, size is the most valuable attribute. Size has a significant impact on the desirability of a property. Although both properties will rent well, based on the suburbs vacancy rate of 0.6%, the likelihood of an owner occupier wanting to purchase Property One is weakened by its size. To compare the properties fairly we need to consider their prices as a rate per square metre.

Property One equates to $10,740 per sqm as opposed to Property Two which equates to $10,340 per sqm.

Not only is Property Two larger but it’s also cheaper on a per sqm basis, not to mention the superior, quality, location and amenity which I’ll discuss below.

Location:

Property One is in a similar however, slightly inferior location to Property Two. Property Two benefits from sitting on the cusp of East Melbourne, Melbourne’s most expensive suburb on a per square metre basis. It’s not uncommon for new properties to be sold at a rate of over $16,000 per sqm. It’s proximity to East Melbourne will strongly enhance its appeal.

Design & Quality:

Property One

Property Two

Evidently, the thought and effort which has been put into the design of Property Two is far superior than that of Property One. The use of large industrial-like windows on the façade encapsulates the history and heritage of Collingwood. Internally, the use of exposed concrete ceilings and track lighting bring a warehouse feel to the apartment. Residents in Collingwood appreciate this, and these features and components will ensure Property Two meets the market in terms of design and quality.

Amenities:

Property Two has been designed with resort-like amenities. Understanding the typical Collingwood demographic of a young couple of high-income earning professionals has helped the developer of Property Two to provide the type of amenity which will attract and drive demand. This includes:

Rooftop pool and spa
Communal dining and recreational spaces
Co-work space
Communal library and bar

These amenities have been designed using exposed brick, concrete and metal to deliver to Collingwood a property which reflects its long history.

‘Price is what you pay, value is what you get.’ – Warren Buffett.

It’s our job to ensure our clients are not just purchasing cheap properties, rather purchasing properties which will withstand the test of time and maintain high demand both from a rental and resale perspective. The micro aspects of our research model allow us to do this effectively.

Posted by Dominic Cavagnino, on 2nd Oct 2018