Andrew Winter On Blue Chip Property
Blue chip property or is it Blue Chip location, the later phrase is far more frequently refereed to in the prime real estate market, yet I would argue that simply acquiring a property in a blue chip location alone is not enough to ensure your dollars are placed with less risk and assured strong returns.
In fact I often see investors pile in to secure the latest release of property purely because it is within that blue chip location, letting their financial guard down, simply paying too much and potentially investing in an over supplied or weak product.
Blue Chip location is a strange term with even stranger origins, literally referring to the colour of poker game chip. A location may lay claim to this title if it can offer all or most of the following elements -
- To be within a major city and in a radius of no more than 10kms, preferably less, to the CBD. That radius can extend a further 5-10 kms when coupled with a large city such as Sydney.
- An established housing market with limited land supply, decades of property data available, and I believe a constant strong demand from existing residents.
- Access to public transport, ideally within walking distance, preferably trains/trams along with an efficient bus service, plus convenience to major road networks/airports
- Essential services including medical, well regarded schools and universities all within easy reach.
- A recognised positive lifestyle factor, from a bustling café/coffee shop scene to parks, leisure and sporting facilities to fine dining.
These areas are often defined by a public perception of desirability, that is hard to discover from online research, so explore your selected area in person.
Locations of this nature come at a price, however risk is less and generally demand is high, when the inevitable downturn in the market cycle appears you maybe cushioned from the worst, but that is where I issue a word of caution. Ensure your property purchase is equally ‘Blue Chip’ and not the Joker in the pack!
Your property maybe safe geographically then you should still consider the following –
- If it is brand new, whilst this has many advantages tax wise and reduced maintenance, the price may be high. A little more than the neighboring similar established housing stock, but research will tell if it is a premium too much
- If you plan to rent your investment to tenants, high sale prices, high buying demand does not naturally equate to high rental returns, if your are purchasing within a large new development scheme there can be a short term over supply (rentals and resales) for the first few years, even in the bluest of blue chip areas.
- These areas offer the best buying when very few are, purchasing in a location such as this is best amidst a downward cycle, whilst values could still reduce further, they generally bounce back to their former levels after a few years, then the upward cycle returns.
- Buy the right property, in family suburbs a substantial family home near a school could be prime, but the more urban location the house could be niche market and a small unit could be the answer.
- Consider adjoining areas, this is a higher risk strategy but that can pay off, just ask residents of Sydney’s inner city suburb of Redfern.
In summary blue chip in real estate terms means safer, often more expensive to enter but less risk, however never rely on that suburb alone the property needs to fulfill a criteria too.
Andrew Winter is one of Australia's most respected and popular real estate authors and commentators, News Limited property journalist and host of Selling Houses Australia, Love It or List It, and Tiny Houses Australia.
Andrew's latest property show, Love It or List It, with co-host Neale Whittaker is no less compelling as the duo help property owners grapple with the option of renovating and staying out - or selling up and moving on from their family home.
Andrew is a straight-talking character with a wealth of experience in real estate marketing and investing and is instantly recognisable to any regular Foxtel viewer or News Limited reader.