An Aussie View – How to tell if your property is A-grade, B-grade or C-grade, and why it’s critical when selling
In a softening market, property experts often talk about about how ‘A-grade’ properties are still selling well, but ‘C-grade’ properties might be struggling.
But what’s the difference between these grades, and are A-grade properties really downturn-proof?
What is an A-grade property?
A-grade properties are more resistant to downturns in the market.
Sydney buyers’ agent John Carew, from Mayfield Property Buyers, said people often assumed all A-grade properties were in the $5 million-plus price bracket in Sydney.
“It’s not true,” he said. “Every price bracket has an A-grade property equivalent.”
A-grade properties tick all the boxes for their prospective buyers, and despite differing price points, the fundamentals underpinning the property’s value are still the same.
Located close to shops, amenities and the local “village”, A-grade properties are found on good streets and never main or arterial roads.
Main roads are a major turn-off for buyers. Photo: Paul Rovere PTR
Usually they also had a “very good aspect” – north to rear being the best, according to Mr Carew.
Transport connectivity is also a key factor, and school zones are critical, according to Melbourne buyers’ agent Wendy Chamberlain from Chamberlain Property Advocates.
“It might not matter if you don’t have kids, but it might matter to the next person you try to sell it to,” she said. “You need to future proof your investment.”
Buyer’s agent Wendy Chamberlain said that school zones were a key factor in the Melbourne market. Photo: Michele Mossop
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Within the apartment market, buyers might also be drawn to apartments constructed by a well-regarded builder, or highly sustainable buildings.
“There are certain styles or types that will always be considered better,” Ms Chamberlain said, adding older apartments built in historical styles were very desirable.
“A smaller boutique block will far better regarded than a massive tower – which could have a lot of renters, or even short-term accommodation.”
Buyers were also disinclined to buy any where near large power lines. Photo: Luis Ascui
Which properties get a B? B-grade homes should be in the right suburb, but not where buyers prefer, according to Ms Chamberlain. “There might be an old part and a new part of the suburb, and they might want to be in an old part of the suburb with more prestige and bigger blocks,” she said. Properties lacking parking might also be B-grade, and according to Mr Carew, those further from the local village might get marked down. “It might not be in a bad street, but up a hill and a hassle to get to,” he said. Well-located properties in need of a renovation might get a B. “The floor plan could be awkward – it doesn’t have that flow from the rear to the outdoors, the bedrooms are clunky, or it’s a bathroom short,” Mr Carew said. B-grade properties generally have most of the right fundamentals and could in some cases be renovated to an A-grade standard. “You can’t change the size, the location or the aspect of the block – but you can change everything else,” Mr Carew said. Buyers often targeted B-grade properties for their potential value, according to Ms Chamberlain. “If it’s a family home, people like to find something they can make into what they need,” she said. What makes a property C-grade? Lesser-grade properties might be in or adjacent to a light industrial area, or in a suburb just starting to gentrify. “They’re located on a main or arterial road, or close to industrial areas,” said Mr Carew. They could also be homes built on steep or battle-axe blocks.
Finance issues can put buyers off lower grade properties, as banks may avoid lending for a home that would be harder to sell in the long run.
Unlucky C-Grade properties were the ones most severely affected by the downturn over the last six to 12 months, according to Mr Carew.
“In some cases, the actual properties are really nice,” said Mr Carew. “But buyers are becoming pickier and pickier, and really looking for value.”
Why the grade matters
In a strong market, all homes increase in value, according to Ms Chamberlain. “A rising tide floats all boats,” she said.
But when the market comes off the boil, A-grade properties continue to perform well, while B- and C-grade properties lose their value at a quicker rate.
“All things considered why could you buy a B or C-Grade property when you could now afford an A-Grade?”
A-grade properties could even entice people who weren’t otherwise looking, according to Mr Carew. “They really drive that emotive response,” he said. “They’re much less impacted by a softer market.”
On the other hand, C-Grade properties could take three to six months to sell in a slow market, Mr Carew said, especially if vendors still had boom-time prices in mind.
“The rate of price growth is very different for each property type,” he added. “And you don’t want to pay an A-Grade price for a B-Grade property.”
“You have to assess merit, assess value, and buy accordingly.”