Valuing Property is not as simple as you may think – especially in today’s property market in Australia.
In hot markets, many buyers will pay over perceived current market value for properties driving the asking and selling prices higher and higher in the process. Conversely, in less confident times, or in stressed markets, vendors will compete with each other to secure a buyer and keep prices low. So valuing property at any particular time is a science that involves a number of strategies and key drivers to get right.
Each property has a different value that changes constantly over time, because as properties in the area sell, these nearby properties push the potential of the particular property price up or down.
In hot markets, more properties go to auction, as buyers roll the dice on the upside potential. In tighter times, with fewer buyers in the market, sellers will compete by offering good fixed prices to attract more potential buyers.
A market can be made more unpredictable by distressed sales, mortgagee in possession at auctions, deceased estates and mates rates deals to family or friends.
This can lead to some confusion amongst investors as to what is the real market value of a property.
If you haven’t done your research and you’re an unwary investor, you’re effectively handing over some, or all, of your potential profit to the person that you’re buying the property from.
If you’ve done your research properly you’ll be closer to knowing the real and potential market value of the property you’re competing for as a buyer. When it comes to selling a property, having an accurate price estimate of the market value of your property puts you in a powerful planning position, at least in terms of an accurate realised equity position.
So how do we find the actual market value of properties..?
Plain old internet searches are a great start. Google ‘property prices in .. your suburb’ – and filter through the result for credible sources versus those just trying to get your details, and look for those legitimate reports providing local sale prices of properties in your area and region.
You can also look for charts with how the value of property in general in your area has changed over time. Be careful before signing up to anything. If you’re signing up for Newsletters or joining commentators of the market, check their credibility by the usefulness of the information they freely provide, and the match to your values they have. Be careful of property spruikers and use independent property agents to advise you before taking on any real investment.
Market appraisals from local property agents will provide further data to examine. The thing to be conscious of here, is that they will be showing you lists of properties they have sold, in order to encourage you as a seller, to use them to sell your property. This isn’t about valuing your property per se, but showing you how effective they are in selling it.
Regardless of this, real estate agents can be very good at estimating prices in areas they know well and deal in, of course. They will often have something like a, ‘Comparative market analysis’ report, showing you their research on the value of properties in their, and surrounding areas, and even trends over time. Useful data from local agents is invaluable. Having relationships with them allows further insights. Again, be sure to talk with an independent property adviser before committing to any real investment.
Sworn Valuations provide a report for potential lenders showing the property exists, the condition it is in, and the likely current sales price. Many property owners can be mistaken to see this fixed document as the true current market value, given the market, especially in some of today’s capital city markets in Australia, is a moving feast.
Another way when valuing property is when you know, or can find online, how much the property last sold for. You can then look at the percentage annual growth over time of that area. If, for example, the suburb has grown by 6% per year – this can give you a broader indication of the current market value for the area. But this won’t necessarily apply to every property of course.
More good tools include Google Maps, and the street view feature.
You can literally travel around the world with this technology – getting a bird’s eye, and street view perspective of the most populated areas in Australia and beyond. Considering price per square meter data, you can check the land and property sizes in the area, and be sure that you are comparing like-for like properties. You can also consider the layout and desirability of an area, including proximity to important services such as transport infrastructure, schools, universities, malls and parks. Data showing the population growth of cities in interesting to cross-reference on maps with the growing fringes of Australia’s cities. For valuing property, it gives you a broader view of the region, which can be both very useful and interesting.
Ultimately the most reliable and easiest way to accurately estimate the current value of a property is by finding accurate sales data of property sales nearby – and taking into consideration important factors depending on your short, medium and long term goals.
Maximise your upside by working with the right team who work in the property investment market every day – searching for new insights and opportunities, and having the experience and relationships to help optimise your property investments.