by Carly Susic, Melbourne Buyers’ Advocate
If you’re buying a luxury home, congratulations! It’s a very exciting time in life, especially when you have an ample budget and you’re looking for a premium home in one of Melbourne’s top suburbs.
But it’s important to be cautious and strategic. With those higher price tags, it can be easier to make a financial mistake. And the more you spend, the more that mistake may cost you later down the track.
It’s easy to get carried away about designer features, and the fabulous lifestyle you’ll be living in your new luxury home. It’s fun! I do love to help people purchase homes and one of the perks of the job is property inspections in some of the most beautiful homes I’ve ever seen.
But there are several pitfalls you need to be wary of when buying a luxury home.
Now is a great time to buy a luxury home
With the market cooling off and prices down from 6-10%, it’s a great time to purchase a luxury home. You won’t be paying anything near the prices we saw in 2021. So that $4 million dollar home you fancied back then is possibly now valued at $3.6 million instead. However, vendors are not wanting to sell for those reduced prices, so many are holding off. This means that there may be slim pickings in the listings for your dream home. This, in turn, means that buyers are forced to compete for the rare opportunities that do become available.
Be prepared to take time
Patience is a virtue in any property market, but especially so when you’re buying a luxury home. Because properties are held in families for far longer than typical homes, it can be tempting to jump at the first home that comes on the market, even if it doesn’t meet your standards. You are far better off watching and waiting and being prepared to purchase only when the right home comes along.
It is difficult to compare in the luxury market
Due to the lack of comparable sales in the luxury market, it can be difficult to know the price bracket. When homes are held for a long time, the historical sale might date back to the 1980s, which is hardly relevant in today’s market. And the more unique the property, the harder it is to compare. This means that agreeing on the price may be difficult. The vendor may want $10 million, but you think it’s worth $8million. With no comparable sales data, it can be challenging to agree on what the home is truly worth. And for you, the buyer, it can be easy to overpay if you are not careful.
Be prepared to negotiate
Just because you can afford the property, doesn’t mean you should pay through the nose to get it. We want you to secure the property at the fair market price, as far as possible. Due to the lack of comparable sales, it really does come down to who wants to pay what price. So you can negotiate hard in these circumstances, and it helps to have an experienced buyer’s agent in your corner to make sure the negotiations are firm without being too aggressive.
Your competitors have deep pockets too
If you get your heart set on home, it’s possible that another buyer will do the same. And at the upper end of the market, it’s possible that your competitor will have deeper pockets than yourself. If you’re at the top end of your budget, and you have someone else who doesn’t blink at throwing in an extra few hundred thousand, be prepared to miss out and continue the search.
Luxury home sales have more complexity
Due to the higher prices, it may be that the home buyer has more caveats in place. Finance at these higher levels takes longer, or the buyer might have to liquidate assets to be in a position purchase. Read the contracts carefully and be fully prepared yourself, if you have a shorter settlement expectation you can negotiate on this alongside the purchasing conditions. Extra long settlements are more common in the luxury home market, so be prepared to wait if necessary.
Consider the resale options
Even though you’re buying a dream home, it’s still important to think about market appeal when you’re selling later. It might be decades away, but you’ll be glad you purchased a property that is broadly appealing that you can hope to sell easily when you need to. Many luxury buyers are too busy having fun choosing a great home without thinking about what future buyers may be interested in. Some of the features you may love personally may not be appealing to future buyers, so keep that in mind too.
Pools are polarising
Some buyers absolutely love pools, while others hate them and will actively tell their agent or advocate to skip any house with a pool. But when it comes to luxury homes, pools are commonplace and expected. Even if you don’t like pools yourself, your future buyer may expect a pool, so getting rid of it may be unwise. If you don’t have a pool, another option is to ensure the home has space for a pool, so that you or a future buyer has the option to add one later.
Don’t fall for the glitz and glam
Luxury homes have amazing features, and can be styled to really sell the dream. So it’s important to look beyond the fancy technology and the expensive artwork, and the french wine in the cellar. Some buyers can get distracted by those lovely features and fail to consider the basic features of the home. What are the bare bones of the property really like? Make sure you look at orientation, floor plan and maintenance, as well as any heritage listing overlays that may apply to the property. Some of those older homes have higher renovation costs, so putting in a new luxury extension may be more costly or difficult than you realise.
The more you spend, the more upkeep costs you face
Keep in mind that your luxury home will be expensive to run. You’ll need cleaners for the kitchens, bathrooms and garden. All those floors and extra large marble benchtops mean your cleaning crew will need more time for mopping and scrubbing floors. And every extra toilet and shower needs dedicated cleaning on a regular basis. Not to mention the pool and water features, and lovely manicured gardens. If you’re in the market for a luxury home, and you plan to outsource the maintenance, it’s wise to get an idea of the monthly operating costs before you move in.
What are the best luxury home areas in Melbourne?
The inner city suburbs such as Toorak, East Melbourne and Armadale are always the attracting premium prices i. Any homes with views of the Yarra command a premium, like Hawthorn, Alphington and Kew. Views of the bay command a premium in Albert Park, Brighton, Hampton and Williamstown. But many suburbs have pockets of premium homes. Then there’s top inner-city favourites like Malvern, Camberwell, and Elwood. There’s also great buying in outer suburbs, if you want a more secluded feel and larger land areas, like in Warrandyte and Park Orchards or further down the bay to the Mornington Peninsula. It all depends on your property wish list, your preferred location and your budget.
To recap: buying a luxury home
- now is a good time to buy due to the cooler market conditions
- but there is scarcity in the market so be patient in your search
- be prepared for more complex sale conditions
- consider the resale options, even if that may be years away
- there is often little comparative data to help you decide on a fair market price
- be aware of potential competitors with deep pockets
- keep in mind the maintenance costs of the property
- go for the most prestigious suburbs, like Toorak, Brighton and Armadale, or the best pocket in your preferred suburb
