Powered by MOMENTUM MEDIA
SUBSCRIBE TO OUR NEWSLETTER SIGN UP
Powered by MOMENTUM MEDIA

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Real value of property ‘an inexact science’

house sold house sold
reporter 8 minute read

Raine & Horne Group’s executive chairman has said that predicting market value remains an “inexact science”, but maintains that market valuations are not “worthless”.

In recent months, several economists have forecast that the year 2021 would result in strong growth in Australian real estate prices amid record low-interest rates.

However, several brokers have suggested that property valuations from lenders are often “vastly under” market valuations, while hotly competitive auctions mean that the true value of property might currently be over-inflated.

Raine & Horne Group’s executive chairman, Angus Raine, has conceded that predicting market value remains an “inexact science”.

Advertisement
Advertisement

According to Mr Raine, market value ultimately “depends squarely on what a specific purchaser will pay”.

Moving forward, low-interest rates, economic performance and government stimulus will certainly influence growth in value, he suggested, but scarcity will be one of the biggest factors that will influence market value and pricing moving forward.

“Whether the scarcity relates to the house or land size, the type of property, construction quality, unique view or location, making price predictions is challenging,” the chairman commented.

As property markets recover from the impact of COVID-19, sudden market movements, whether upturns or downturns, can influence pricing as well, according to Mr Raine.

However, he added that “this is not to say that market valuations are worthless”.

PROMOTED CONTENT


“For properties where scarcity and market movements are not in play, a real estate agent is clearly in a better position to predict buyer behaviour,” Mr Raine said.

Agents and valuers often look into buyer interest, or the number of groups inspecting the property, as well as past sales data as basis for their valuations.

Determining the ‘right price’

Apart from a range of broad factors, including scarcity, market movements and economic performance, individual buyers and sellers will also impact the final price.

According to Mr Raine, the “amount of cash at the buyer’s disposal, a property’s proximity to a buyer’s extended family, and the perceptions of the suburb or town” could affect pricing.

Similarly, the vendor’s urgency to acquire cash may influence the market value of the property just as much.

“When some of these factors, including scarcity, come into play, the value put on a property by a buyer can be affected by anything from 10 to 40 per cent.”

The ultimate determining factor for property value then, according to the executive chairman?

“An auction is the true litmus test for determining the real value of a property,” Mr Raine concluded.

What are your thoughts on property valuations? Have you experienced inflated or below-market valuations recently?

Let us know by taking The Adviser’s snap poll on valuations.

Real value of property ‘an inexact science’
house sold
TheAdviser logo
house sold

TODAY'S POLL

View results >

Do you find that lender valuations frequently come in below 'independent' market valuations?

Thank you for your vote, you can see the results here.

 

more from the adviser
warning Major banks reveal major issue of abusive transactions

The big four banks have acknowledged that more needs to be done o...

Ross Mcewan Buying 86 400 will fire up competition: Ross McEwan

The chief of the big four bank has denied that the 86 400 takeove...

NAb building logo NAB offers $2k grants to Cyclone Seroja victims

The big four bank is offering $2,000 grants to customers and sta...

FROM THE WEB