Hi. I have been thinking about a town close to myself, just outside of Melbourne, which has been written into the plans to be developed into a much larger town. There is some potential for growth in my view, and some risks. It is also simply an area I would like to move to myself one day, so I guess that is playing in my mind too.
But my question is, this town, which will still be predominately families in the event of development, has some established houses, on nice sized blocks, and are building like crazy in the new parts.
So I was wondering if anyone knows what the tendency is to happen in this kind of development phase? Do the older larger houses in the centre of town remain a premium, or do people buy and/or build the new houses? Does house prices tend to stagnate until the building has finished? Rental costs, vacancy rates?
It really does depend on the numbers. Large development can increase the profile and desirability of the town which can definitely work in the favour of values – but if the supply/demand ratio is skewd towards supply this will provide a long term dampener until scarcity resumes. With some regional councils they quickly do become accustomed to the increased income which development provides, which can in turn lead to a relaxation and further release of supply. This can be not only detrimental to capital values – but rents too.
Tread carefully and remember – there certainly isn’t an under supply of physical land in Australia, so you’re reliant on artificial scarcity from restrictive development and strong desirability to help you achieve long term growth.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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