The average West Australian home is about 30 years old. This is not too surprising, however it is unusual that around 40 per cent of our housing stock is roughly the same age and rapidly in need of upgrading. In many other Australian cities and towns, there is not the same volume of older house, due to the housing boom experience in Perth in the 1960s and 1970s.
As the volume of old properties naturally increases in Perth, this leads to an increase in large scale real estate development. There are also opportunities for Perth Real Estate investors to benefit from this by purchasing older properties suitable for redevelopment, renovation and re-sale, but you should check with your tax adviser firstly about property depreciation deductions on new expenditure.
Some homebuyers in Perth would not be accustomed to buying older properties that might need upgrading. For these people it is important to keep in mind that over time two things occur to most properties. First, the value of the land goes up and second, the value of dwelling depreciates. The rate of increase in land value usually outweighs the depreciation in the dwelling, and there will come a time when the value of a property is almost equivalent to the land value.
With little depreciation left in the actual dwelling, these “block value” properties are highly sought after by real estate developers and investors as the on going land value increases. Its beneficial if the property is still in good enough condition that it can generate a rental income.
Older properties are also good starter homes for first homebuyers in Perth. These buyers often start with a small deposit and it is important that they benefit, at an early stage, from swifter increases in the value of their property in order to build up equity to enable them to upgrade later on.
When you purchase an older home it is strongly advisable to undertake a professional building inspection and obtain a report on the structural soundness of the dwelling. Naturally there will be understandable wear and tear in an older home which is largely cosmetic and easily repaired. This should not be confused with structural soundness, which is more about the ‘bones’ of the home and usually means there is no significant detectable damage to the its main structure, including the foundations, walls, and the roof.
A building inspection should uncover more usual wear and tear and might include a worn-out solar hot water system, rusted gutters and broken tiles to more costly items like faulty electrical wiring.
From a buyer’s perspective it is important to firstly clarify the structural soundness of a property with any issues that arise being discussed in negotiations over the purchase. On inspection of a property you should also become aware of any upgrades that are required to the property and which can be attended to at the discretion of the buyer.