Spring 2024 – Is It Really Here?

Ah, Melbourne weather—just when you think spring has arrived, the rain might swoop in! But regardless of the weather, the Spring real estate market is here.

Market Expectations

Agents are expecting stock levels to increase, but the real question is about the quality of the properties available. There’s a lot of investment-grade or ex-tenanted stock coming onto the market, but truly top-tier, fault-free properties seem to be in short supply.

Having been in this game for a long time, I’ve noticed a pattern: Each weekend, only about 1%—maybe 2%—of available stock can truly be considered prime. That’s roughly 7 out of 700 properties!

The “Magnificent 7” – A Rare Find

These top-tier properties tend to perform differently from the rest. For example, last Saturday in Beaumaris, I saw a property that was as close to “perfect” as you can get—completely fault-free.

The top end of the quoted price range was $1.65 million. (though that’s not always the most relevant figure).

I valued it at $1.85 million.

“But here’s the thing: I wasn’t entirely confident it would sell for that, despite having six interested parties. Competition was likely, but there was no solid justification for it based on recent sales.

And yet, it sold for $1.961 million.

This kind of result is exceptional in the current market and shows what can happen with prime properties.

Opportunities on the Horizon

For most of the market, conditions are a bit tougher for vendors, which could be good news for buyers. We anticipate the market may soften further into the Spring, with October through December offering potential opportunities at various price points.

Need Advice?

For personalized guidance and assistance, feel free to contact:

John Sommers at 0412 787 055
David McRae at 0407 316 199

The post Scoring Prime Melbourne Properties This Spring 2024 appeared first on The Australian Lending & Investment Centre.

Understanding Market Dynamics

Here’s the deal: Different segments of the market move at different speeds. Makes sense, right? Why should a cozy one-bedroom apartment appreciate at the same rate as a luxurious $10 million mansion? They cater to different needs and budgets, and thus, their values shift uniquely.

So, Where Are the Opportunities?

It seems like every buyer out there is chasing a well-renovated house, regardless of the price point. These homes, which make up about 3% of the market, are in high demand and often fetch top dollar at auctions, sometimes even exceeding expectations. But let’s be real—that’s just 3% of the market!

The Real Gems

We believe the real opportunities lie elsewhere. Yes, building costs have shot up over the past two years, but they’ve recently stabilized. However, the sentiment around renovations hasn’t caught up yet. This means now might be the perfect time for those with vision and a medium to long-term strategy.

Consider this: Buying the best period-style house in a prime location with good “bones.” It should be in liveable condition, either for you to move into or rent out. Then, when the time is right, you can undertake that renovation or extension and create significant value. The demand for beautifully renovated period-style homes never fades, ensuring you’ll have buyers eager to snap up your transformed property in the future.

“When are the best 3 months each year to buy in Melbourne? October, November and particularly December. Yes to buy, not to sell. Stock levels are through the roof, and the number of buyers don’t ever go up to match.

So what happens? Other than the top 1% of stock, prices soften. Simple. Definitely. Unquestionably. It’s impossible to defy the laws of supply and demand. So get ready!”

– John Sommers

Timing Is Everything

• Sub $2.0 Million: Ideally, make your move before interest rates drop, as this part of the market is more sensitive to rate changes.
• Above $2.0 Million: Less influenced by interest rates, so it’s all about finding the right property when it becomes available.

Need Expert Advice?

For personalized guidance and assistance, feel free to reach out to:

• John Sommers at 0412 787 055
• David McRae at 0407 316 199

Unlock the hidden potential in Melbourne’s property market and make savvy investments that pay off in the long run.

The post Unlocking Hidden Opportunities in Melbourne’s Property Market appeared first on The Australian Lending & Investment Centre.

The Power of Leverage

One of the most significant advantages of using an investment home loan to build wealth is the power of leverage. With a relatively small down payment, you can control a more substantial asset. When property values appreciate, your gains are calculated on the total property value, not just your initial investment. This amplification effect can significantly boost your wealth accumulation.

Rental Income

Investment properties, whether residential or commercial, can generate rental income that serves multiple purposes. It not only helps offset the costs of your investment home loan, including mortgage payments, property taxes, insurance, and maintenance but also provides a steady stream of income. In some cases, rental income may even exceed these expenses, leading to positive cash flow.

Tax Benefits

The tax advantages of investment home loans can be a powerful wealth-building tool. Mortgage interest, depreciation (such as Capital works Depreciation, Quantity Surveyor Fees), rental expenses (such as Advertising costs, Legal Fees, Insurance, Council, Accountant costs and & Rental Agent fees), Capital Gains Tax etc. are all deductible expenses that can reduce your overall tax liability. These tax benefits can significantly enhance your wealth-building strategy.

Long-Term Appreciation

Real estate has a historical track record of appreciating over time. While short-term fluctuations occur, over the long term, real estate has proven to be a solid investment. By taking out an investment home loan to purchase a property, you can benefit from property appreciation and create substantial wealth as your property value increases.

Considerations and Risks

While investment home loans can be a potent tool for wealth building, they also come with risks and considerations that need to be carefully managed. Some of these include:

Market Volatility

Property markets can be subject to fluctuations, and property values may not always rise. It’s essential to have a long-term perspective and be prepared for market downturns.

Debt Management

Taking on an investment home loan means taking on debt. Managing this debt responsibly is crucial to prevent financial strain or potential foreclosure.

Property Management

Owning an investment property requires time and effort. You’ll need to manage tenants, address maintenance issues, and stay on top of property management to protect your investment.

Interest Rates

Interest rates on investment home loans can vary, affecting your overall return on investment. It’s important to monitor interest rate trends and consider strategies like refinancing when rates are favourable.

Local Regulations

Regulations related to real estate and property investment can vary significantly by location. It’s crucial to understand the laws and regulations in your chosen investment area.

Investment home loan lending can be a potent wealth-building strategy when used wisely. Leverage, rental income, tax benefits, and property appreciation all contribute to creating substantial wealth over time. However, it’s essential to approach this strategy with careful planning, risk management, and a long-term perspective. By understanding the advantages and considering the potential pitfalls, you can use investment home loans as a valuable tool in your journey to build wealth through property investment prior to your dream home.

The post Navigating the Power of Investment Home Loans for Your Property Portfolio appeared first on The Australian Lending & Investment Centre.

Fixed Interest Rates:

A fixed interest rate remains constant for a specific period, typically ranging from one to five years. This means that regardless of any fluctuations in the market, your interest rate and monthly mortgage payments will remain unchanged during the fixed term. This stability can provide peace of mind, as you can accurately budget your finances without any surprises.

Advantages of Fixed Interest Rates:

1. Predictable Budgeting:
With a fixed interest rate, you can easily plan your monthly budget, knowing that your mortgage payment will stay the same throughout the fixed term.

2. Protection from Rate Increases:
If interest rates rise during your fixed term, your mortgage rate will remain unaffected, shielding you from potential financial strain.

3. Peace of Mind:
Many borrowers prefer the stability and security offered by a fixed interest rate, especially for first-time buyers or those on a tight budget.

Considerations for Fixed Interest Rates:

1. Limited Flexibility:
While a fixed interest rate provides stability, it also limits your flexibility. If interest rates decrease, you will not benefit from the lower rates unless you refinance your mortgage, which might involve additional costs.

2. Potential Break Costs:
Breaking a fixed-rate mortgage before the term ends may incur break costs or exit fees, which can be substantial. It’s crucial to carefully consider your future plans and the possibility of needing to sell or refinance before committing to a fixed interest rate.

Variable Interest Rates:

A variable interest rate fluctuates based on market conditions, meaning your mortgage payments can increase or decrease over time. The interest rate is generally influenced by factors such as the Reserve Bank of Australia’s decisions, economic conditions, and lender policies.

Advantages of Variable Interest Rates:

1. Potential Cost Savings:
If interest rates decrease, you will benefit from reduced mortgage payments without the need to refinance.

2. Extra Repayment Options:
Variable rate mortgages often allow you to make additional repayments, which can help you pay off your loan faster and save on interest payments.

3. Flexibility:
Variable interest rates offer greater flexibility, allowing you the freedom to refinance or switch to a fixed rate if market conditions change or if you need to adjust your financial strategy.

Considerations for Variable Interest Rates:

1. Uncertainty:
As interest rates can fluctuate, your mortgage payments may increase over time, potentially affecting your monthly budget. It’s essential to consider your ability to handle potential rate increases.

2. Risk of Rate Increases:
If interest rates rise, your mortgage payments will increase, which can impact your overall financial situation. It is crucial to plan for potential rate hikes when opting for a variable interest rate.

As you can see, choosing between a fixed and variable interest rate for your loan is a significant decision. While fixed rates offer stability and predictability, variable rates provide flexibility and the potential for cost savings. Ultimately, the right choice depends on your financial goals, risk tolerance, and future plans. Consulting with your Investment Lending Manager at ALIC can help you evaluate your options and make an informed decision that aligns with your circumstances.

Please reach out to me on 044 9266 031 or helen.connick@alic.com.au for a confidential chat about building your wealth through property investment.

The post Fixed interest vs variable – How do I choose!? appeared first on The Australian Lending & Investment Centre.

Guests include:

1. Jacob Field: CEO & Founder Of Ripehouse Advisory
2. Damian Brander: Managing Director At The Australian Lending & Investment Centre
3. Julian Nicolitsis: Head Of Strategy At Ripehouse Advisory
4. Mike Mortlock: Managing Director At MCG Quantity Surveyors

Topics Covered In This Video:

1. Interest Rates and Property Valuation Trends
2. Policy Impacts on Investment and Supply
3. The Mortgage Cliff: A Real Concern or Media Nonsense?
4. Tax Revisions and Property Investment
5. Supply, Demand, and Investor Confidence
6. Construction Industry Forecast: Addressing the Housing Supply Shortage
7. Examining the RBA’s Position and Inflationary Pressures
8. Addressing the Rental Affordability Crisis inAustralia
9. Wage Growth and Its Role in Economic Balance
10. Long-Term Perspectives of the Investor

Watch the Full Uncut Discussion

The post [Ripehouse Advisory] Addressing The RBA appeared first on The Australian Lending & Investment Centre.

In response to this challenge, the Australian government has introduced several First Home Buyer Schemes to assist prospective homeowners in achieving their dreams. These schemes aim to alleviate the financial burden of purchasing a first home and make homeownership more accessible.

First Home Owner Grant (FHOG):

One of the most well-known schemes for first-time homebuyers in Australia is the First Home Owner Grant (FHOG). This grant provides financial assistance to eligible buyers, helping them offset the cost of buying or building their first home. The grant amount varies from state to state, and is generally more generous for new homes than established properties. FHOG aims to encourage first-time buyers to invest in new properties, stimulating the construction industry and increasing housing supply.

HomeBuilder Grant:

The HomeBuilder Grant was introduced in 2020 as a response to the economic challenges posed by the COVID-19 pandemic. This scheme provides a substantial financial boost to those looking to build or renovate their homes. While not exclusive to first-time buyers, it is a valuable program that can significantly reduce the cost of a new home or home improvement project, thus aiding first home buyers.

First Home Super Saver Scheme (FHSSS):

The First Home Super Saver Scheme is another initiative designed to help first-time homebuyers save for their future homes. Under this scheme, individuals can make voluntary contributions to their superannuation fund, which are then withdrawn to be used for a first home purchase. The advantage of this scheme is that the contributions are taxed at a concessional rate, making it a tax-effective way to save for a home deposit.

Stamp Duty Concessions:

Stamp duty can be a significant expense when purchasing a property in Australia. Many states and territories offer stamp duty concessions or exemptions to first-time homebuyers, reducing the financial burden associated with property purchases. These concessions are typically available for properties below a certain price threshold and can result in substantial savings for first-time buyers.

Shared Equity Schemes:

Some states and territories in Australia offer shared equity schemes, which allow first-time buyers to purchase a home with a government partner or an affordable housing provider. These schemes involve shared ownership, where the buyer purchases a portion of the property while the government or provider retains ownership of the remaining share. This reduces the initial financial outlay and can be a stepping stone to full homeownership.

Australian First Home Buyer Schemes play a crucial role in making the dream of homeownership a reality for many aspiring property owners. These initiatives provide financial assistance, tax benefits, and reduced property transaction costs to first-time buyers. While the specific eligibility criteria and benefits may vary from state to state, these schemes collectively contribute to the accessibility of the Australian property market, ensuring that more individuals can take their first step onto the property ladder. Whether through grants, concessions, or shared equity options, these programs demonstrate the government’s commitment to helping Australians achieve the security and pride of homeownership.

The post Australian First Home Buyer Schemes: A Pathway to Homeownership appeared first on The Australian Lending & Investment Centre.

The journey of buying and selling a home can be a complicated and often stressful process, especially when there’s a need to synchronise the sale of one property with the purchase of another. This is where bridging finance comes into play, offering a temporary financial solution to bridge the gap between selling your current home and purchasing a new home. In this article, we will explore the concept of bridging finance for residential mortgages, its benefits, risks, and how it can be a valuable tool for homeowners.

Understanding Bridging Finance

Bridging finance, also known as a bridge loan, is a short-term loan that provides the necessary funds to purchase a new property while you await the sale of your existing one. It essentially “bridges” the financial gap between these two transactions. It is typically used in situations where the sale of a property is expected, but not yet complete, and the funds from that sale are needed to secure a new property.

Benefits of Bridging Finance

1. Seamless Transition:

Bridging finance allows homeowners to make a smooth transition from their old home to a new one without having to deal with the stress and inconvenience of temporary housing arrangements.

2. Competitive Bidding:

In a competitive real estate market, bridging finance can be a game-changer. It enables buyers to make strong offers on their dream homes without waiting for the sale of their current property, which can be a compelling factor for sellers.

3. Timing Flexibility:

Bridging finance provides flexibility in terms of timing, allowing homeowners to move when it suits them, rather than being forced into a rushed sale due to financial constraints.

4. Property Renovations:

It can also be used to finance renovations on the new property, enhancing its value and making it more suitable for the homeowner’s needs.

Risks Associated with Bridging Finance

While bridging finance offers several advantages, it’s essential to be aware of the potential risks:

1. Interest Rates:

Bridging loans typically have higher interest rates compared to traditional mortgages, which can lead to increased costs if the sale of the old property is delayed.

2. Property Market Fluctuations:

Market conditions can affect the sale price of your old property, which may not align with your expectations.

3. Repayment Challenges:

If the sale of the old property takes longer than expected, repaying the bridging loan can become a financial burden.

4. Eligibility Criteria:

Qualifying for a bridging loan can be challenging, as lenders often require a solid financial profile and a clear repayment plan.

How to Secure Bridging Finance

To obtain bridging finance for your residential mortgage, consider the following steps:

1. Research Lenders:

We will start by researching reputable lenders who offer bridging finance and compare their terms and interest rates.

2. Ensure a Clear Exit Strategy:

Lenders will want to see a clear plan for repaying the bridging loan, so we will ensure you have a strategy in place.

3. Organise Your Finances:

Ensure your financial documents are in order, as lenders will require proof of income, existing mortgage details, and other financial information.

Conclusion

Bridging finance for residential mortgages can be a valuable tool for homeowners looking to make a seamless transition between properties. It offers flexibility and convenience, allowing you to secure your dream home while waiting for the sale of your old one. However, it’s crucial to understand the associated risks and ensure that you have a solid repayment plan in place to make the most of this financial solution. With careful planning and the right guidance, bridging finance can make the transition to your new home a much smoother process.

The post Bridging Finance for Residential Mortgages: A Path to Seamless Home Transitions appeared first on The Australian Lending & Investment Centre.

1. Increasing Existing Loan

It’s crucial to understand that you can’t merely expand your existing home loan to create more tax-effective debt. Australian tax laws mandate a clear separation between the portion of the loan used for investment purposes and the portion used for personal or non-deductible expenses. Failing to maintain this distinction can jeopardise your ability to claim deductions effectively.

2. Mortgage Structure

When converting your home into an investment property, consider re-evaluating your mortgage structure. This may involve adjusting the loan type, interest rate, or repayment frequency to align with your investment objectives and optimise cashflow. For instance, an interest-only loan can lower your monthly payments, but it typically necessitates a robust strategy to repay the principal down the line.

3. Loan Structuring

To ensure the tax efficiency of your investment loan, it’s essential to collaborate with a lender or advisor to establish a new loan. This often involves creating a distinct loan account for the investment property, specifying the loan’s purpose, and maintaining meticulous records of how the borrowed funds are allocated for investment-related expenses.

4. Interest Rate and Terms

Keep in mind that the interest rates and terms for investment loans may differ from those applicable to owner-occupied loans. It’s wise to conduct due diligence by comparing offerings from various lenders to secure a competitive rate and terms that align with your investment strategy.

5. Interest Deduction (Negative Gearing)

Transitioning your home loan into an investment loan enables you to claim tax deductions on the interest paid. This can substantially reduce your taxable income and overall tax liability. However, it’s imperative to maintain a clear separation between your investment loan and personal expenses to ensure you can make these deductions correctly.

6. Principal Repayments

Consider how you plan to address principal repayments on your investment loan. While interest payments are tax-deductible, the principal portion is not. Deciding whether to make principal repayments should align with your investment strategy and long-term financial goals.

7. Tax Compliance

Adhering to loan structuring and record-keeping requirements is critical for tax compliance. Non-compliance can lead to tax complications and potential disallowance of deductions. Thorough documentation and consultation with a tax professional are essential to ensure adherence to all tax regulations.

8. Professional Advice

Given the complexity of this financial transition and the potential tax implications, it’s advisable to seek guidance from a financial advisor or mortgage broker who specialises in investment property finance.

In summary, when transforming your primary residence into an investment property, it’s crucial to carefully follow tax compliance and loan structuring rules. Ensuring a clear separation of the loan accounts for personal and investment use is vital to maintain the tax-deductibility of interest. We highly recommend seeking professional guidance throughout this process to avoid potential tax issues down the road. If you have any questions or would like to discuss the above further, the team at ALIC specialises in investment lending and is here to help you along the way.

The post 8 Key Considerations For Converting Your Home Loan Into An Investment Loan appeared first on The Australian Lending & Investment Centre.

Disclaimer

Before you start reading, keep in mind that all information contained on this page is either Mark’s personal opinion or information from third-party sources. None of this information represents the views of ALIC or related entities, nor is it investment or property advice. You should not make any financial or investment decisions based on this information.

If you need property advice, book a meeting with one of our brokers for a referral.

Book A Meeting With Mark

• July to September 2023

Changes in Australian Housing Markets

At ALIC, we help our clients create wealth through property – and that means making sure they’re investing in the right places.

To stay on top of the markets, we hold fortnightly meetings with some of Australia’s leading property experts.

Here’s what they told us.

• Market Insights

Blue-Chip Markets Primed for Growth

Over the last three months, the cost to buy certain blue-chip properties in Melbourne and Sydney has been exceeded by their replacement costs – thanks to a string of builder collapses and rising material costs.

For example, if a high-end property costs $3.2 million to acquire, you might pay $4 million in replacement costs.

Why does that dynamic matter?

Because, as soon as interest rates experience downward pressure, many property advisers predict that those blue-chip markets will pick up drastically.

• Market Insights

A Shaky Landscape, Firming Up

Personally, with three consecutive on-hold calls from the RBA, I’ve seen our clients’ cash flows starting to stabilise and become more consistent. 

People are beginning to have a better understanding of their finances and the landscape they’re operating in – and that confidence could potentially lead to greater investment activity in high-opportunity markets. 

(Property advisers we work with are currently recommending places like Toowoomba, Mandurah and Rockingham.)  

If and when the RBA does decide to lower rates – CBA is predicting a drop in early 2024 – we could see increases in those markets to the tune of 20%.

• Market Insights

Hike and Balance: Maximising Rental Yields

Rental demand has increased drastically across Australia over the past year – the only capital city that’s seen sluggish growth is Melbourne.

But, with supply continuing to tighten, it’s likely that Melbourne is on track to catch up with rental rates in the rest of the country.

So, what can investors do to maximise rental yields and cover their increased costs?

The most obvious step is to increase rent to match the rest of the market.

Many of our clients are also re-balancing their portfolios to combine lower-yield properties in capital cities with higher-yield regional assets.

For example, if someone owned properties in Sydney or Melbourne with a 3% yield, they might look to properties in regional Queensland or Western Australia with 5 or 6% yields to ease cash flow pressure – which is particularly important for investors with large debt.

• Market Insights

Construction Costs Responsible for Low Supply

Everyone in Australia is aware that construction costs – thanks to builder collapses, material prices, and labour constraints – are impacting the housing supply. 

But many people still hold a misplaced faith that those costs will return to a pre-COVID baseline. 

In my opinion, that’s not likely. 

Supply and demand will continue to outstrip any minor reductions in prices, and, in all likelihood, we’ll see building costs actually go up as demand swells over the next few months. 

The best we can hope for is the type of softening that we’re already experiencing – a deacceleration, not a reversal. 

• Property Oracle

The Next Three Months

The RBA’s last three meetings have seen the cash rate unchanged – and there’s a possibility that we won’t see any more increases at all. 

That means Australia’s housing markets will likely open up for investments. 

Buyers will regain their confidence, and, as activity increases, we’ll see rental yields continuing to accelerate thanks to the ongoing supply-side issues. 

Renters will continue to struggle – but, for investors, the October–December period could be highly appealing. 

The post Property Intelligence Report Q1 2023 appeared first on The Australian Lending & Investment Centre.

Of course, it’s not just about the big personalities or grand veneers. Part of the appeal is a suspicion that buyers of luxury properties pay for the prestige and social licence that comes with a trophy house, rather than the investment potential of the asset in question. 

And that’s partially right. Exclusivity does drive the price up. But it’s also not the whole story. Like Gucci or Versace, the luxury nature of prime Melbourne and Sydney real estate means that overpaying a little to get in yields long-term dividends. Blue-chip property isn’t an ego buy that drops value when trends swing the other way. It’s a resilient asset that’s ideal for storing and growing wealth over time. 

And it’s one that is increasingly hard to acquire. 

A History of Buoyancy 

Top-end homes in Sydney and Melbourne (the top 5% of each market by value) have a history of being resilient to economic tides – even when industry sources, like CoreLogic, might seem to indicate otherwise. The very top percentiles are so in demand and so rarely on the market that the normal rules simply don’t apply.  

It also helps that the buyers of luxury property are typically high-net-worth or ultra-high-net-worth individuals with multiple income streams. Short of a widespread recession, Melbourne and Sydney’s best suburbs won’t be short of buyers.  

According to John Sommers, a director of buyer advocacy firm McRae Property, those two traits mean luxury properties hold their value well over time. 

“From my 35 years of market experience, I can say with total confidence that ‘blue-chip’, premium-quality properties have historically outperformed the broader market,” said Sommers. “And there is absolutely no evidence of that trend slowing down”.  

McRae Property is one of Melbourne’s most established buyer advocacy firms, having been created over 20 years ago and operated by its two directors, John Sommers and David McRae, who (uniquely in this industry) are both qualified valuers. They specialise in high end homes in all inner and bayside suburbs. 

Scarcity Matters, Not Interest Rates 

At the top end of the Melbourne and Sydney property markets, “interest rates are not even discussed”, says Sommers. “The conversation is centred on ‘where or how do I find the asset that will suit my requirements.’” The reason is the same one we discussed earlier: the level of exclusivity in luxury real estate means that the normal rules of nature don’t apply. It’s about scarcity, not external factors like interest rates.  

At the time of writing, that immunity to market forces has been further reinforced by Australia-wide issues with the construction sector: a string of builder collapses, chronic material shortages, and widespread labour constraints. In the vast majority of cases, the replacement costs of luxury homes exceed the cost of new purchases – which means there’s a serious supply issue. It’s why both luxury markets have defied analyst predictions and continued to perform well over the past year. 

“In my view, [this] will continue […] unless there is a significant alteration in stock availability. I am not holding my breath,” says Sommers. “Frankly, there is no simple solution. Buying prime real estate for fair market value is quite an achievement in the current environment. So be prepared to step up and pay market value if that will secure the asset. That is a win.” 

Don’t expect demand to subside, either. According to Knight Frank’s Melbourne and Sydney Prime Residential Insight (Q2 2023) reports, Melbourne’s ultra-high-net-worth population (people with net worths of $30 million or more) grew by 5.8% YoY, and Sydney’s by 7.8% YoY. The millionaire class of each city grew by 6.4% and 7.7% respectively.  

Blue-chip Melbourne and Sydney real estate has never been more desirable, and there’s never been less of it to go around. 

When to Invest in Blue-Chip Melbourne and Sydney Properties 

The reality is that most high-net-worth individuals can’t afford to purchase a prime Sydney or Melbourne property – and probably shouldn’t even be thinking about it.  

It’s not about being able to drum up a deposit or secure a loan. Virtually any mortgage broker can find a lender on their panel who’ll give you approval. But buying a blue-chip property isn’t something to tackle lightly. 

For example, when you purchase an asset worth $3 million in Melbourne – which is at the lower end of what could be called ‘blue-chip’ – you can expect to pay around $200,000 in stamp duty. Servicing your home loan can be equally demanding, especially if you choose to live in your new property (as the vast majority of blue-chip buyers do). Rather than ‘stretching’ to acquire a blue-chip property by shouldering an uncomfortably large non-deductible debt, acquisition should feel natural, an extension of years of strategic property investing.  

For many investors, that process is simple: buy low, sell high, repeat. Good execution comes down to working with the right buyer’s advocates and brokers – knowing which areas are forecasted to experience high growth, buying at the right time with correctly structured loans, and then divesting assets at their cyclical peaks so that you can reinvest capital into the next batch of high-opportunity properties. Each property might take three to five years to offload, so building up to buying a blue-chip property can seem like a slow journey, but it’s one that will ultimately pay dividends.  

And if your net worth is already at a level where inner-city Melbourne and Sydney assets are comfortably within reach? 

It’s time to talk to your broker and buyer’s advocate, because acquisition can be gruelling, time-consuming, and deeply difficult. You’ll need a team that understands how to source assets that match your requirements. You’ll need to time your entry correctly, and you’ll need a loan structure that aligns with your current financial situation. 

“Sourcing options off-market can and does lessen the competition,” says Sommers. “Last week, we bought a Bayside home for north of $9 million with limited competition. Don’t look online for photos, however, because there aren’t any. [It was] all done very quietly … just the way we like it.”    

Of course, it isn’t all doom and gloom. 

“If you want a sugar hit, then stick with Gucci or Versace,” Sommers advises. “Buying that [blue-chip] real estate will […] probably cost you more than you expect. Then again, if you do succeed in securing one […], it should outperform the general market and become an asset that is retained to foster long-term wealth growth.” 

The lessons here are three-fold: one, you probably can’t afford that Rose Bay villa you’ve been eyeing off – at least, not comfortably. Two, working up to a blue-chip property is a methodical process, not a spur-of-the-moment decision. Three, you can’t just step up and expect to be served. You need the right people, a tolerance for paying more than you expected, and a decent stroke of luck. 

But, if you do get into the exclusive blue-chip club, you’ll have a high-performing asset that you can rely on in perpetuity. 

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