Don't Rely on Price Guides - March 2023
March 8, 2023 / Written by Rich Harvey
By Guest Blogger, Daniel Gold, Principal,
Long Property, www.longproperty.com.au
The AFR reported last weekend that this property at 135 Somerset Street Richmond VIC sold at auction for $4.2 million – a staggering $1.15 million above reserve.
This past weekend we also had one of our clients sell their property, and the price they secured was not only well above the quoted range, it was at a level that even 12-18 months ago would have been considered ‘excellent’.
All of this is at the same time property prices are falling, confidence is low, and some of the most respected property experts in Australia are suggesting we’re near the bottom.
For example see last week’s SMH article with comments from John McGrath. Real estate veteran predicts bottom is nearing for house price falls – full article here
When it comes to price guides, on the other side of the spectrum, I’ve been closely watching this property at 10 Two Bays Crescent Mount Martha VIC. The original list price c 6 months ago was $3.29 million, and since then it has been lowered multiple times... You can see it’s now advertised with a price guide of $2.25 - $2.475 million.
Despite Two Bays Crescent being one of the top streets in Mount Martha, my local contact who knows the Peninsula market intimately believes the price will come down further. Not because the market is depressed there, really just because the particular property has many drawbacks and was overpriced to begin with.
Instead of relying on price guides I encourage you to seek out the most relevant comparable sales for the property you’re interested in. List out the key property features like land size, number of bedrooms/ bathrooms/ car spaces, quality of dwelling, orientation, date of recent sale, etc. Then compare your subject property to these other properties you’ve researched to get a feel for ‘fair value’. I’d recommend building up a spreadsheet in Excel.
Often you’ll need to call selling agents as well not only to find out the end sale results but also to get a better understanding for how the campaigns went, certain attributes about the properties, who the end buyers were, etc.
Valuation is definitely more an art than a science. But once you have a sense of value you can overlay this with what the property might be worth for you.
For example you might be willing to pay a premium for a property which ticks every box, even if this is above where the data suggests fair value might be, particularly if you’re an owner occupier as opposed to an investor.
Again the key point is to block out the noise. Do your own homework. Ignore price guides.
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