Established Area or New Development?
Established Area or New Development? This is the question me and my husband had been debating about before buying our new house.
From my previous post, I did mention about us moving on from renting to buying a property. But, it was not as easy as just deciding to buy a property. We had other plans, other than just looking for a house to live in. We had a set criteria. It was our basis in narrowing down our choices.
We used to live in Sydney’s North Shore. It is an established area. It is near the city, malls, trains,hospitals, good schools and the beach. We had lots of firends in the area. It is just 10 minutes away from my husband’s work. You might be wondering, if its all positive, why leave the area?
The answers goes back to the criteria we set. We are not after a property that we are planning to live permanently yet. Our main priority is a property that would present us with a good potential capital growth on a long term basis and a good rental yield on the short term outlook.
In the North Shore, specifically in the area where we used to live the price of most properties are on the high end of the price curve already. With our budget of $400K to $500K, we can buy a good dwelling but it would not meet the criteria we set. Since, it is an old area most of the houses are a bit older in style. The good ones are way beyond our budget. To add, the potential rent is not commensurate to the amount of money we are investing. No new dvelopments are earmarked for the area. We have to hedge our investment against the potential scarcity of land in the future and increase in demand to drive the prices up. This is a good outlook in a bullish market. However, the current outlook of the real estate market is on the bottom part of the cycle. The prices are correcting, demand is low and the interest rate is going up which further pushes the prices downward.
In this climate, we decided to add more factors in our criteria for buying a property. We wanted to look for a developing area where we can still buy at a low price. We wanted to hedge on capital growth on the basis of the growing population in the area as an outcome of the new infrastructures being built.
However, just like any investment nothing is completely risk free.
But, in our decision to buy in a newer development we have maximized the amount of money we invested.
We minimized the risk due to the the added factors of developent in the area which means:
I. New infrastructures which will prompt new businesses to be established ==>
which will translate to more employment opportunities ===>
which would attract more people in the area.
II. The projected population growth has prompted the government to join forces with the private sector to improve the transportation network, schools and other facilities in support of this new community.
In economics, we call this the multiplier effect which I will discuss in detail in another post.
We find the whole idea of buying in a newer development a much worthy exercise, considering the factors affecting our buying decisions now. However, in a different post I will also discuss the advantages of buying in an established area and the short term opportunites available.
In the end, one’s choice of buying in an established area or a new development depends on the critera you set and which one will help you achieve your goals more.
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1 opinion for Established Area or New Development?
propertycrossroads.com - New Urbanism…a reaction to urban sprawl
Dec 7, 2006 at 8:20 am
[…] From my previous post, I wrote about our decision to purchase a property in a developing area over an established area. […]
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