I start with this breaking news from the Herald Sun – dated 28 August 2018:
The proposed 90km suburban rail loop is an excellent plan to improve the commute of people in Melbourne, between suburbs and to the airport, adding value to the most “livable city in the world”.
Without a doubt, the $50B underground train network is excellent news to all real-estate sellers in Victoria as many cities will stand to benefit from relative growth in the long term.
This breaking news and many others similar news updates will also affect many investors in their decision to buy real estate in a particular location with the intention to benefit from the growth.
Promises from marketers and sellers
With all the hype about the new infrastructure and the promises of substantial growth, marketers and sellers tend to include this information into their brochures and marketing campaigns to encourage investors to buy properties from their developments or their listings.
While some will succeed in creating real value for their clients, most will fall behind in their promises after the property is sold.
Why do they fail to deliver their promises?
Based on past statistics, a new infrastructure in the suburb, such as a train station, generally brings significant impact to the growth of the particular location. However, it is crucial to know that this is not applicable and relevant to all dwellings or all locations.
When word goes around that big projects such as a train system will be built at a particular area, many developers will increase the number of buildings they intend to develop within that area.
A suburb with an initial low-density zone will eventually become a median to high-density zone as many first home buyers and renters will prefer to stay in the suburb and travel by train to the CBD and the airport.
Others, on the other hand, may prefer to downsize, look for something more affordable or move to a townhome or a unit close to the train station.
Will these properties be good investments?
The answer is straightforward – not every location will be an excellent choice for investing, especially if the property associates with high risk and low returns.
Typically, marketers and sellers will try to convince investors that in time, a 1-2 bed unit will be valued 2 to 3 times more. As lucrative as that sounds, as an investor, you should stay calm and not make your decision solely on this superficial advice.
Have proper risk management
Any investor or home buyer should always have a proper risk management framework before committing to a purchase. Doing so avoids exposure to any unnecessary risk and increases the efficiency of the investment process.
For example, it is good to know that some areas in Melbourne East such as Clyde or Doncaster are associated with high risk. This rings true especially for townhouses and apartments. With the new train, the risks might go above high to extreme danger.
Should you trust free advice?
“Firstly, no one believed that real estate could be risky, in the sense that the term ‘risk’ existed only in theory. Also, all ‘players’ in the property game had similar objectives: for the banks, it was ‘approve the loan’, for developers: ‘develop high-rise unit blocks’ and for investors ‘get rich quick’. Investors have been particularly impacted as the market is full of spruikers promoting the latest so-called “hotspot” and offering their own free reports to property punters. It was shocking to see adults spend more time researching cars than on a half-a-million property, that could make a financial impact on the rest of their lives,” said Mr Peleg, the CEO of RiskWise – an independent property research company.
He further added, “Why would you pay for a report when you can get one for free? They failed to understand that ‘if you don’t pay, you’re probably not the client.’”
Unlike other property reports available in Australia, the Riskwise algorithm can instantly generate a comprehensive report by measuring dozens of data and information variables (including more than 30 macroeconomic) against a broad range of risk factors, ultimately scoring the property’s risk rating from low to high.
Having access to credible property reports, such as the Riskwise report, can help you to make smarter property investment decisions based on informed risk assessments
At the end of the day, a new infrastructure is great news only when the suburb, the asset class, the property configuration, the median price and other critical vital facts are associated with low to moderate risk. Otherwise, the new infrastructure would only serve the developers and property investment firms better.
Make sure you always take independent advice and use proper risk management to validate any marketer or seller talks.