Properties that will double in value in seven to 10 years: Monique Sasson Wakelin
Discussing with Property Observer the ways she selects assets that, at minimum, double in value every seven to 10 years, Wakelin Property Advisory's Monique Sasson Wakelin divulged a few of her property perspectives.
We've shared part of our exclusive interview in the video below.
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Transcript:
It becomes very obvious over a large period of time which particular property styles, suburbs, precincts, characteristics stand the test of time and actually produce the best investment outcome. What's interesting is that a lot of people argue that the past growth won't necessarily dictate the future growth, how do you reconcile those ideas?
I think the important message here is that really high quality assets tend to perform very consistently over time. That doesn't mean that property values never go down. They do. And we've recently experienced precisely that over the last three years, I think we saw about a national 10% decline in value and we've started to recoup some of that loss.But the difference between the wider market place and the really good quality parts of the marketplace is not so much that the value never goes down, but it actually goes down far less than what more compromised parts of the marketplace will show in the later decline.
And importantly when market conditions stabilise and we see a resumption of growth, what I call the bounce back factor is hard and fast in the really good quality assets. So you'll see perhaps the wider market place recoup perhaps 3%, 4%, 5% growth but the really good quality properties might start recouping 6% or 7% right off the bat. So it's really very much about being on the ground, having the data at your disposal.
We've got files and files and files of properties and we've been able to track their trajectory over 20 years or more. And so, it's really important for investors to understand that property values and growth factors will fluctuate, but what we're trying to do in terms of really good quality asset selection is beat the performance of the wider marketplace.
Q. When you're talking about this quality asset, what does that look like to you?
When it comes to houses we like to choose investments that are anything from the 1880s probably to about the 1940s or 1950s. And the key note here is that the asset has to have what we call scarcity value. In other words, there has to be much more demand for that particular type of asset in that particular location than there ever will be supply to satisfy that demand. The same criterion applies to apartments. With apartments you want anything from 1930s through to about the 1970s. Those are the assets that really confer and satisfy that criterion of scarcity value.
I must say, and I'm well and truly on the record here, that off-the-plan investments don't work. They don't have that scarcity value, the vast majority of them. There are always two or three examples that break the rule to prove the rule, but they do tend to be geared towards owner occupiers, many of them are seven figures, rather than what I would consider to be the garden variety investment apartment at a more affordable level for most investors. I'm really talking about something between $500,000 and $700,000. Whereas these ones that may have started out as off the plan would have started out as $700,000 or $800,000 investments when they were sold but they'd now be worth well and truly in excess of $1,000,000 and sometimes even $2,000,000.
Q. What do you think about the more boutique-type off-the-plan, for example a block of six ?
I still don't like them. Not only because of the scarcity value but the location might have scarcity value if it's not a main road, but I tend to stay away from main roads when investing for clients - noise, pollution, all those things - but also from an architectural point of view.
There's something about classic architecture, of course, which can't be either replicated or replaced. Whereas even boutique off the plan apartments are somehow not architecturally scarce enough for them to still look good 20 years down the track. They tend to look architecturally obsolete and tired very quickly. That's one of the reasons.
But the biggest reason is that they tend to be well and truly overpriced when they're sold. Well and truly priced above the prevailing housing stock on the established market and people who buy them tend to have to wait years and years, and many years often, not only to maintain value but also to grow substantially. Remember the benchmark: it has got to double in value every seven to 10 years. I would have to say, I can't think of too many examples of off-the-plan apartments for investment purposes that have actually fulfilled those criteria.
Q. If you did see that an off-the-plan apartment building was going up in an area that you'd focused on - do you think that would be a positive or a negative for that area?
I think it depends on the kind of development it is. How big it is. Exactly where it is. We've seen this, certainly in Melbourne and in Sydney many many times, where there have been proposed off-the-plan apartment buildings that have caused absolute uproar amongst the residents. So you have to really deal with that on a case-by-case basis.
If we're talking about a small, tasteful, boutique development of between four and six townhouses or some nice apartments, they're generally not a problem in terms of adversely affecting the value of existing housing stock. It's only when you start looking at towers of multi-storeys with lots of apartments that residents begin to get nervous. And rightly so, because it does affect the level of amenity in the area. Which is what those existing residents have paid for and it's why they've got into those areas in the first place because of the lifestyle and the level of amenity.
Monique Sasson Wakelin is a director of Wakelin Property Advisory, an independent firm specialising in acquiring residential property for investors.
You can contact Monique on Twitter.
