16th November 2010: Ask a Fletchers Agent

Today's advice comes from Tim Fletcher, Director and Executive Chairman of the Fletchers Group. With over forty years experience in the real estate industry, Tim Fletcher is one of the most respected and prominent members of his profession.

How much value do you put on land and how much on the building? And finally, how much is to do with emotion?"

The value of land is – and always will be – fundamental to the success of your investment, but where you buy is of utmost importance. This is particularly evident now that the market is more realistic, as demand always wanes first in second and third choice areas but continues to flourish, or at least remains stable, in suburbs closer to the city that provides excellent infrastructure. In fact, many recent results show some units and apartments in great areas are selling for outstanding prices, reflecting that position is more important than land!

There is a great misunderstanding about the value of improvements (buildings) in a very high land content area. In many cases it is not a matter of how much they add to the land but how much they detract, so it is a misnomer to determine the value of a comparable lot and add a number for the improvements, even though the buildings may be sound and appropriate at the time of construction they may now undercapitalise the land.

Emotions certainly play a major (though not easily defined) role in determining value. Naturally, it depends on whose point of view you consider. A vendor has more of an emotional investment in a property although a builder would not. Certainly if the property is an outstanding Victorian property that can be renovated, emotions will come into play for purchasers as well.

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