The majority of properties change hands with minimal upgrades in between sales. Maybe a new coat of paint, maybe new curtains, some new plants in the garden. But otherwise, they’re pretty much the same as the day they were bought … just a little older.
In mature suburbs, however, we’ve long known that properties are often renovated and extended, and this has an impact on the sales prices being achieved as larger properties generally attract higher prices.
Our recent analysis of residential sales in Cottesloe, Dalkeith and Nedlands over a period of around 20 years has given us a good insight into the changing face of these suburbs and its impact on property prices.
Firstly, some context….
Looking solely at houses, the chart shows the strong growth in median house prices over the longer term in Cottesloe, Dalkeith and Nedlands. And they grew more strongly than greater Perth.
Focusing on the more recent sales, when prices were relatively stable, the following chart shows a distinct preference in our three suburbs for more recently constructed houses. This tends to beg the question – is the market’s love affair with older properties waning?
Taking a closer look at property size by build year, from the following chart we can see that the house sizes have changed over time. 2 bed and 3 bed houses were the most popular house sizes during the 1900-1949 period. However, by the 1980-2015 period, 4 bed houses were the most popular. And any 3 bed houses built during those years came with 2 bathrooms. Knowing that house prices are affected by property size, we can see how the higher prices being achieved by the more recently built houses are also driven by the newer houses being larger in size.
In reality, there were few houses built early last century with 4 and 5 bedrooms. Many of those we see in the previous chart were smaller houses extended to meet the needs and expectations of modern families. This, too, has an impact on median sale prices. Generally we only see the price of the house sold. We don’t realise that the previous time it was sold, it was a much smaller property.
The best way to examine the impact of this is to look at resales, when a property is sold once, then sold again.
From 1990-2015, 78% of the sales in Cottesloe, Dalkeith and Nedlands were of properties that were sold more than once during the period. 55% of resales were sold twice during that period. 1 property changed hands 9 times.
86% of those properties were sold “largely unchanged”. 9% of properties were expanded (increase in number bedrooms and/or bathrooms) between sales. Demolitions and developments of vacant lots (newly developed or demolished) accounted for the rest.
Focusing on 2011-2015 sales, those properties that were resold largely unchanged had made gains (since their previous sale … which could have been as far back as 1990) of 7% per annum.
In contrast, those that had been renovated and extended made gains of 21% per annum on average.
Renovations and extensions, property styles and trends are just some of the things that impact on median sale prices. That is why it is important to look behind the broad trend to examine what is influencing prices, aside from a general increase in the value of land.
It is this extra detail that PropertyESP is known for and which can benefit your next project. For more details contact Samantha Reece on 0452 067 117.