Which property ‘market’ are you in?

Did you hear that Melbourne house values increased by an average of 11.7% last year? That figure should bring smiles to all Melbourne homeowners. However, if you happened to own a unit in Melbourne last year, its value only increased by an average of 5.7%. I shouldn’t really say ‘only‘ because any increase is an increase and that is much better news than a decrease!

These figures come from the recent quarterly report by the Real Estate Institute of Australia (REIA). What they clearly demonstrate is that our property market is not the same across the board, whether you are talking cities vs regional areas, cities compared to each other or even different segments in each city. In fact, it could be fair to say that there really is no such thing as THE property market. Instead, there are actually lots of different property markets!

If you take a closer look, it’s fairly easy to see that what we call our property market, is actually made up of several distinct groups, all of which operate independently of each other. For example there are homes, units, apartments, managed apartments, student accommodation… just to name a few. Apart from these different types of properties, we also have different areas such as metropolitan or regional, inner or outer suburbs, etc. Each of these react differently to each other and behave differently depending on various aspects of the economy. While they all fall under one umbrella called ‘property’, in reality they record different levels of growth and yield to each other.

Houses will grow at different rates to units. There are clear market differences between the two. For example, units have a lower price point of entry. They are usually smaller, have less land, and are subject to things like Body Corporate rules that a free-standing home is not.

And of course, different suburbs grow at different rates too. The investment press seems to have an unlimited appetite for playing games trying to guess the next “hot suburb”. While that seems pretty obvious, it’s not always acknowledged. 

So how does all of this relate to finance?

Well, you may have started the New Year, thinking about what you might do this year or into the future. And those plans may include a future property purchase, upgrading to something bigger or even cashing in some equity. Whatever your plans are, your estimate of the value of a property is your starting point. And this may in itself be just a “guesstimate” you are playing with in your mind, while you weigh up your options.

The trouble is, if you underestimate the true value of a property you may think there is no real equity available in it for you and miss out on an opportunity to exploit that equity and put it to work for you. On the other hand you may overestimate the equity in an existing property and be disappointed that it doesn’t give you any options at the moment.

Obviously therefore, gaining a true understanding of the value of your home or investment property is the first step in really knowing if you have equity available there for you. Now there are many different ways you can find out the value of your home. Let me take you through some of the most obvious.

The most clear-cut indication of the value of any property is to sell it. As silly as it seems, putting the property on the market will give you the “market value”. That is the price that the market is willing to pay to buy your house.  You simply cannot get a better indication of something’s value than to put it to the market. Unfortunately that’s probably not practical if you simply want to access the equity in it! 

Alternatively, you could engage a Registered Valuer to give you a valuation. For a fee, you can have a Valuer provide you with a written report on your property which contains an opinion of the value. It’s important when doing this, that you ask for a Valuation for Mortgage purposes rather than Market Value. This way you will get an understanding of what the Lender will see when they order their own valuation (which, rest assured, they WILL do!)

You could also ask a real estate agent to provide you with a written estimate. However, be aware that the agent will base their figures on the fact that he or she will be keen to sell it for you and may go high to try to win the business. This method is best considered as a “ballpark” figure and is not a valuation as such, but it is free. If you want to be more accurate ask him/her to provide recent sales figures for properties that are comparable to yours.

If you wish, and you have the time, you can do the hard yards yourself and search any of the online websites to get an idea of what properties are fetching in your area.  But this again is only an estimate.

Whichever way you go, the goal is to get an accurate idea of your current equity situation, so you can base your plans for the future on it. If it turns out to be better than you were thinking, more options may open up for you, which given what’s been happening recently, could be plenty.

I have been keeping an eye on valuations coming through recently and I’m very pleased to report that they seem to increasingly coming in with far more realistic figures on them. It seems the Valuers are finally starting to agree with all the positive statistics being reported.

As always, if you have a plan in the back of your mind, or even the front of it, and you’re weighing up your options, now might be the time to find out exactly where you stand. If I can help in anyway, don’t hesitate to contact me at vincent@investorsdirect.com.au


1300 663 836

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Investors Direct Financial Group

Investors Direct Financial Group (IDFG) was established in 2001.
Our mission is to help our clients achieve and maintain their financial freedom.

Members of the IDFG Group include:
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