Investors need to be wary of the new breed of property marketing incentives

Investors need to be wary of the new breed of property marketing incentives
Investors need to be wary of the new breed of property marketing incentives

When you look at the two properties below what differences do you see?

Investors need to be wary of the new breed of property marketing incentives

Investors need to be wary of the new breed of property marketing incentives

On the surface they are obvious in that one is brand new in a highrise building while the other is old and in a smaller block.

However from a property investors point of view the major differences are not the physical attributes of the properties but more in the way they are marketed and sold.

During the last investor fuelled property boom incentives such as stamp duty savings, depreciation benefits and rental guarantees were the main marketing tools used to help sell property. However this time around many investors have woken up to these tactics so the marketing has become more imaginative.

Property investors are being lured into buying apartments in the first property with the offer of a free Vespa or Mini. But these things are not free as they will be paid for in the over all purchase price.

I saw another ad that offered buyers one Qantas frequent flyer point for every dollar they spent on the property. So if you paid $500,000 on an apartment you would receive 500,000 frequent flyer points, enough to get a couple of people around the world.  For the record you could buy a couple of around the world tickets for around $5,000.

While receiving a Vespa or a holiday sounds great the problem with these incentives are they add no ongoing value to the property.

By contrast the Hawthorn property is sold in a completely different way. All the agent had to do was tell people it was available and the market did the rest. When this property went to auction, four bidders attempted to buy it and it sold under the hammer.

The property sold itself because of what it was and where it was and the agents did not have to dress it up with marketing hype.

Alarm bells should be ringing for property investors when they see these kinds of incentives on offer. The value of good investment property is underpinned by psychical attributes such as location, land size, land value and property style.

When looking for an investment it is vital to focus on the things that do not change over time. You cannot lift a house and land up and drop in in a more desirable or handy location a few years after you buy it. Further you cannot change the orientation of the land, the position in the block of apartments or what surrounds the property. Finally you have no control over the supply of new property coming onto the market around you.

Good investment property is often very hard to buy because you are put in a competitive environment, while risky investments are often easy to buy.

My advice? Buy a good property and pay for the toys and holidays yourself.

Mark Armstrong is a director of ratemyagent.com.au, Australia’s number one real estate agent rating website.

This article was originally published on Property Observer in September 2013.

Mark Armstrong

Mark Armstrong

Mark Armstrong is a director of ratemyagent.com.au, Australia's number one real estate agent rating website.

Tags: 
Investor Tips Mark Armstrong

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?