Investing in property not all about location, says head of investment firm

by AB22 Oct 2015
Despite the location of a property often being used to justify a purchase, one property professional says buyers should “take a step back” and look beyond location.

John Fitzgerald, chief executive officer of property investment firm Custodian, told Australian Broker’s sister publication, Your Investment Property, that too many people focus too much on the location of a property.
“Location is important, but it shouldn’t be the thing that makes you choose where to buy,” Fitzgerald told Your Investment Property.
“People get hung up on it and that’s how they end up letting their emotions get the better of them, and buying due to emotion isn’t a smart thing to do,” he said.
In fact, on Fitzgerald’s list of things to take into consideration when buying, location comes in at last. 
“What people should be considering is land content, timing and then location,” he said.
“If you consider those three factors you’re likely to buy a property that is going to be a sound investment.”
According to Fitzgerald, the best returns come from land content.
“It’s the land that’s important; land appreciates in value while buildings depreciate," he told Your Investment Property.
“If you buy an inner-city apartment for $1 million, then 90% of that value is for the building, but if you buy a house in the suburbs then 40% to 50% of the price is in the land.
“We were buying in Sydney and the land was probably $400 per square metre and it’s tripled in price to $1,200 per square metre now. You’re not going to see an apartment give you similar returns.”
Timing is simply understanding market cycles, which Fitzgerald says run in roughly 10-year periods.
For example, Sydney is currently nearing the end of its cycle, which is why Fitzgerald would advise to look at Brisbane or Melbourne now – and it doesn’t just have to be in the CBD.
“A lot of people think they need to be close to the city, but that’s just their emotion taking over.
“You need to take a step back and look for other things.
“I use a rough template to find good locations. I’m looking for high population growth, near train stations, shops and good job opportunities,” Fitzgerald told Your Investment Property.