Which is the better Investment?
Carrara Versus Pimpama
Last week I wrote about the differences between new and established properties in terms of investment performance. One of the key points of this article was that you can get established property in a better area for the same price as a new property.
Of course, it's all well and good to write about this in theory, but what does it actually mean in practice? What do two different investment opportunities - one new and one established - look like in real life?
To explain this, I've selected two suburbs on the Gold Coast: Pimpama for new houses and Carrara for established houses. Both are fairly typical, suburban, house and land-dominated suburbs; Pimpama is a new suburb, while Carrara is around 30 years old. The typical value of a property in Carrara is $495,000, while new houses in Pimpama range from $450,000-$530,000. Investors can secure a reasonably-sized property in either suburb for under $500,000.
To compare the two suburbs, I've looked at 5 key statistics for detached houses:
- Demand to Supply Ratio - Overall assessment of demand to supply (Courtesy of DSR Data)
- Stock on Market - Percentage of properties on sale
- Vacancy Rate - Percentage of properties availabe for Rent
- Rental Yield - Gross rental return per annum
- Building Approvals in the Last 12 Months
- Demand to Supply Ratio: 71/89
- Stock on Market: 2.45% (66 properties)
- Vacancy Rate: 0.51% (14 properties)
- Rental Yield: 5.25%
- Building Approvals (Houses): 51
- Demand to Supply Ratio: 48/89
- Stock on Market: 5.17% (340 properties)
- Vacancy Rate: 3.63% (180 properties)
- Rental Yield: 4.99%
- Building Approvals (Houses): 1,334
Where do you think is the better place to invest? Which area is more likely to rise in value?
Yes, in Pimpama you'll be getting a new property. But our supply and demand statistics show that buyers are favouring location over living in a new property. And while a central location remains central, new properties don't stay new.
The strong buyer and renter demand in Carrara coupled with limited new supply in the suburb, is a recipe for price growth. Weaker buyer and rental demand, coupled with lots of new supply, as we are seeing is Pimpama, is not.