Where should you purchase your first property?

Purchasing your first property is one of the largest and most overwhelming decisions one will make and the first question we often get asked is what type of property to buy and where.

The answer to every individual is different based on one key factor.

When purchasing a property, there are two components to look at – the investment/financial side and the emotional side.

The important consideration to understand is what portion of your purchasing decision is based upon the investment potential versus the emotional.

Investment consideration is around how this asset will grow our wealth and maximise the return on our money whilst the emotional side is more so around whether or not this property and area are one that we want to live in.

Every purchaser is different and the real question to ask is what percentage of your purchase is emotional versus logical and based on numbers?

For some it will be 100% investment-based, 100% emotional-based, and for others it may be 50/50, and so forth.

If buying emotionally, it is very simple. Purchase the property that is the most practical choice for your situation and desired lifestyle. 

For others who want to ensure that they are maximising their investment, we need to be purchasing an asset that is going to grow in value and be a solid foundation for building our wealth.

Below is the main consideration to keep in mind from an investment perspective.

The driver of price growth in any type of market is supply and demand. Where more people want to buy a particular product than what is available, prices go up (over the long term).

Whilst many people try and overcomplicate it, when we look at property – it is extremely simple.

What are the areas and types of properties where there is a limited amount of supply and where everyone wants to live? Often these are in the areas we consider blue chip and the properties are around the median price which most people in the area can afford to live in/rent.

Think of the Eastern Suburbs, Lower North Shore and Inner West of Sydney. 

Take Bondi Beach or Neutral Bay as an example, where there are existing 3 or 4-storey height limits, an abundance or heritage/conservation, and an extremely affluent neighbourhood who don’t want over-development. 

Whilst there will be the occasional new development, it is unlikely that this area will ever see a large influx in supply – ie a brand new 50-storey high rise on Bondi Beach. Whereas in the Sydney CBD where they can keep building high rises or out west where there is always a new house and land package in the next suburb, there is always supply being added to the market.

On the demand side of things, the blue-chip areas are where most people want to live! It is close to the city, beaches, restaurants, and night life – the perfect location for young working professionals with high disposable incomes to pay rent and purchase these good quality properties.

These blue chip areas won’t double overnight and it isn’t our goal for it to anyway. We want slow yet consistent growth where historically these properties have doubled every 7 – 10 years as a result of the supply/demand equation previously mentioned. 

Other areas may increase in value extremely quickly or have higher rental yields – although, over the long term, it is unlikely many locations will outperform the areas discussed. 

Even the best property experts in Australia struggle to pick the hot spots as it is.

It is still ok to purchase in these speculative areas, however, purchasers must be aware that they will most probably be gambling/speculating rather than investing in property.

Some buyers choose to take on a ‘rentvesting’ approach where they get the best of both worlds. They purchase an asset which is a strong investment and are maximising their money whilst they rent a home where they want to live and is practical for them. This can work well for many people in the earlier stages of their property journey.

Every first home buyer is different and it is not for me, your family, friends or anyone else to dictate where and what you should be buying.

It is up to you to decide how much of your buying decision is investment-based versus emotional and choose the right balance from there.