#125: Does size matter? Should you buy a small block of land in a great location or a bigger block further out?

The Property Trio

https://propertyplanning.com.au/propertyplannerbuyerprofessor/ Market update 1. Spotting the suburbs across Australia that are suffering rental losses Our good friend Mike Mortlock from MCG Quantity Surveyors has instituted a rental losses index, which is a direct reflection of vacancy rates. A fantastic tool for any investor to add to their toolkit for identifying whether a location is a good area to invest in. The rental losses index has put a spotlight on university precincts in Melbourne in particular, but also Tarneit where brand new house and land packages dominate. Check out Cate's article in our show notes for more insights. 2. Lowest performing suburbs were on the fringe CoreLogic data reveals that the lowest performing suburbs in terms of capital growth were on the outskirts of capital cities. The largest declines in unit values have been in the outer fringe locations, rather than inner city high rise precincts, where higher density housing has historically been less common and therefore in is less demand. The oversupply of house and land packages has also dampened growth for detached houses. 3. The gap between houses and units is the greatest it's ever been House prices have surged by 28.9% in the 12 months to September 2021, which is more than double the 11.6% gain in unit values for the same period. CoreLogic data reveals the gap in Sydney to be 59% between median house price compared with median apartments, while in Melbourne the gap is 55.3%. These kind of stats would often scare people off, but there is a rising opportunity here in the unit market, as growth is likely to catch up to houses mainly because of affordability. 4. Is now a good time to sell? There is so much exuberance in the market, that now could be a great time to offload B-grade properties, which will have subdued capital growth in softer markets. Bigger is not necessarily better 1. The trap of bigger equals better In this week's episode the trio tackle the misconception that when it comes to capital growth, bigger land size is better. Where you consider properties on the same street with the same orientation, the bigger block of land will be valued higher (provided there are no encumbrances or other physical detractors). But where you are making a decision between a bigger block of land in one location and smaller block of land in a different location, people can make a lot of mistakes by chasing the bigger land. 2. Where did the idea of bigger is better originate? The great Australian dream of having a quarter acre block, with a hills hoist in the backyard and mowing the lawn on Sundays was the aspirational model for family living. That is not necessarily the case now, where suburbs close to the city where the not-so wealthy historically lived in closer confines are now highly sought after. Magazines and seminars have also created hype around bigger land and development potential, creating the misconception that people can get rich if they subdivide the land. 3. Land value not land size The trio discuss the importance of considering the land value, rather than the land size. Location is particularly important here and will have a significant impact on the land value. A smaller block of land in a location closer to the city with have a higher land value than a bigger block of land on the fringes. Think back to Christmas day with the kids, who would much prefer a giant Santa sack filled with gifts from the reject shop because there's more of it, but the smaller Tiffany box is much more valuable! 4. When is the land size too...