THERE are few clearer thinkers about the Perth property market and its associated risks, returns and nuances than Gavin Hegney of Hegney Property Valuations.
In his latest newsletter, Mr Hegney examines the whole issue of returns to property. He identifies a factor that I, for one, did not think about. Mr Hegney points out that: “one of the secrets of investing in homes is that, generally, for the first 50 years, a home usually depreciates in value. This depreciation rate is usually around 1.5 per cent per annum of the value of the home”.
This loss of value is, however, compensated for by an appreciation in the land value.
After 50 years, a reversal of the trend occurs and the home usually starts to appreciate in value. The reversal is due to a number of factors.
Mr Hegney suggests that the most important factor in the reversal process is that the home actually gains value because of its historic nature.
The design and style of the home also can become something of a “collector’s item” in the real estate market.
Mr Hegney suggests that a very clear indication of this trend was in Subiaco when, after more than 50 years, many of the homes in the area were restored to enhance their “character” appeal.
This same trend is identified in a number of other 1930s suburbs that have achieved strong capital growth during the past 15 years as the homes in these areas started to have “historic” interest during the 1990s. Over that 15-year period the median house price in these suburbs has increased by more than 10 per cent (see table).
