What not to buy in a Property Boom

blackhousesWhen the property market is flat we find that a quality property in a good location will always find a buyer.  The properties that struggle are those that have major flaws or are in undesirable locations.  And this is because buyers have choice in a buyers market, so it stands to reason that they will choose something good over something bad (or something not so good at least).

But when a property boom starts up buyers start to panic.   They get desperate and stress that they are being left behind. So all of a sudden properties that previously would not have held the slightest interest for them become very attractive. A classic example is the “renovator’s delight”.  In a hot property boom they get very competitive because buyers feel that they have to renovate in order to be able to afford to buy into their chosen suburb. Often we see that the price gap between unrenovated and renovated houses is disproportionate to the actual cost of renovating.

 

But when the market drops, the prices of these “diamonds in the rough” plunge dramatically. In a buyers’ market, why would you bother renovating when you can take your pick of liveable houses with no upward price pressure.

 

Examples of other properties that plunge in value when the real estate market flattens include:

  • Homes on main roads
  • Holiday houses
  • Those lacking natural light
  • One where its architecture doesn’t fit in with the neighbourhood
  • Too many bedrooms, not enough outdoor space
  • Steep sites
  • Scenes of tragedies

 

A good question to ask yourself is:

Would this property generate loads of interest in a buyers’ market?

If the answer is no, be very careful what you pay for it.

SUBSCRIBE TO OUR WEEKLY BUYER TIPS

Free e-book for Owner Occupiers

7 Steps To Buy Your Dream Home

Free e-book for Investors

How to Choose a Low Risk Investment Property