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Misconception surrounding property values

14 August 2014

Buyers’ agent and co-host of Location, Location, Location Australia Veronica Morgan believes the stand-out misconception regarding property values in Sydney is that all properties within a suburb grow in value at the same rate.

Ms Morgan said that many buyers seem to think that all they need to do is pick the right location and the rest is simple. However, most buyers’ agents have evidence to the contrary.

“The fact is that 50 per cent of property will perform above the median growth rate and 50 per cent below. An experienced buyers’ agent needs to be able to predict which factors will influence performance beyond simply looking at the location,” Ms Morgan said.

“A buyers’ agent who began their career in real estate sales should have finely honed appraisal skills. That means that they can look at recent comparable sales and market behaviour, and be fairly accurate in assessing a property's value.

Ms Morgan said agents should ensure they understand appraisal techniques and not rely on third party price recommendations and external valuations, particularly bank valuations, in order to make recommendations to their clients.

Property values 101

Ms Morgan provides some tips for understanding property values.

  1. Know your market inside out. Be critical of the property you’re evaluating and ask yourself what features might make it difficult to sell in a buyers’ market. These are the characteristics that lead to slower capital growth. Compare like with like, and look at all relevant recent sales, not simply one inferior, one equivalent and one superior.
  2. Ask other local sales agents if they have been through the property and what they thought it was worth. If you can't find enough relevant recent sales, look further back in time and use median growth data from APM, RPData etc to try to get a sense of what it might sell for in the current market. Also look at neighbouring suburbs and compare median sale prices to get an idea of what equivalent properties might be worth in your target suburb. Basically, don't stop looking for information until you can make a confident recommendation to your client.
  3. Lastly, never rely on statistics without interpreting them through the viewing lens of your own market knowledge.