LUXURY%20VS%20AFFORDABLE

LUXURY VS AFFORDABLE Future Estate offers a holistic property advisory and investment solution encompassing both direct property and managed funds.

This eBook does not constitute an investment offer. Prospective investors are recommended to read IM or PDS for further information. No guarantee with regard to future investment performance is made or implied. Whilst every effort has been made to ensure accuracy, no reliance can be placed upon it by recipients.

Intelligent Property Investment

FUTURE ESTATE EBOOK SERIES: LUXURY VS AFFORDABLE

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OVERVIEW As a property investor, would you invest in a luxury property or an affordable property? Learn all the pros and cons of luxury and affordable properties in this eBook.

Luxury The emotional appeal of investing in luxury properties is embedded in the social status of the highly sought after location and lifestyle offered to the occupier. However, luxury properties have historically generated lower investment returns due to lower capital growth and rental yields.

Affordable By definition, affordable properties are properties with near or below the median price of a particular suburb, town, city or region.

Compared with luxury properties, affordable properties arguably offer less emotional desirability to the investors. However, they often provide more stable investment returns and higher capital growth.

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FUTURE ESTATE EBOOK SERIES: LUXURY VS AFFORDABLE

FACTS AND FIGURES Australian Home Sale Values July 2011 to July 2012 50%

90% of buyers purchase properties worth less than $800k

41.2%

40%

30.4% 30% only 5.3% of buyers purchase homes worth more than $1m

20%

10%

11.1%

9.8%

4.8%

4.4%

0 <$200,000

$200,000 - $400,000

$400,000 - $600,000

$600,000 - $800,000 $800,000 - $1,000,000 $1,000,000 - $2,000,000

0.9% >$2,000,000

Source: RP DATA, RISMARK INTERNATIONAL

Over 70% of Australian home sales over the last 12 months were valued between $200,000 and $600,000.

As of July 2012, the median dwelling prices are $412,500 for Australia, $460,000 for Australian capital cities, and $535,000 for Sydney region.

From July 2011 to July 2012, 79% of buyers purchased homes worth less than $600,000; 90% of buyers purchased homes worth less than $800,000; 5.3% of buyers purchase homes worth more than $1,000,000.

FUTURE ESTATE EBOOK SERIES: LUXURY VS AFFORDABLE

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LUXURY VS AFFORDABLE Luxury

Affordable

Greater emotional appeal

Lower emotional appeal

Often a “prime” location

Potentially less “prime” location

Lower investment Return

High Investment Return

High Return Volatility

Lower Return Volatility

Capital Return Comparison: Luxury VS Affordable 2000 - 2012 10%

8%

9.8% 7.3%

6%

6.3%

5.9%

4%

2%

0%

Bottom Portfolio (affordable)

Second Portfolio

Third Portfolio

Source: RP DATA, RISMARK INTERNATIONAL

Top Portfolio (most expensive) Annual Capital Returns

Empirical evidence suggests an inverse relationship between property value and investment return.

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FUTURE ESTATE EBOOK SERIES: LUXURY VS AFFORDABLE

SUMMARY Luxury properties are generally associated with superior locations, social status, poor affordability and lower investment returns.

Affordable properties are generally associated with the mass market appeal, easy transferability and attractive investment returns. This generally means that more affordable property is better suited to property investors seeking longer term, sustainable rental and capital growth returns. It also means it is easier to sell affordable properties, if required, due to better liquidity at the lower end of the market.

Historical data in Australia suggests an inverse relationship between the property value and investment return.

Luxury properties have historically recorded higher return volatility than affordable properties. That generally means that during strong economic periods, the luxury market has performed well and during down periods, the luxury market has performed quite poorly indeed.

The luxury market is generally reliant on accumulated wealth and rising asset values, while the affordable market is generally driven by low rental vacany and stable investment return.

At Future Estate, we focus on high quality â&#x20AC;&#x2DC;investment gradeâ&#x20AC;&#x2122; property that is both affordable and offers clear potential for higher investment returns.

Call 1300 FUTURE today to speak to a Future Estate expert property consultant!

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1300 future (388873) info@futureestate.com.au www.futureestate.com.au @futureestate future.estate future estate

Copyright Š Future Estate Group Pty Ltd 2012

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FUTURE ESTATE EBOOK SERIES: LUXURY VS AFFORDABLE