Why is it so hard to value residential property and what can you do to get a realistic idea of what your property is worth?
Ascertaining a property’s true value is a tricky business: it’s part science, part art, with a fair bit of guesswork thrown in for good measure!
This is largely because property is unlike other assets, such as shares, where any unit sold is identical to every other unit, explains John Lindeman, author of Mastering the Australian Housing Market.
“Estimating property values is difficult because no two house or units are the same,” he explains.
“Even two identical houses in the same street will have difference prices, and two adjoining units in the same block will sell for different amounts, because one has a better view than the other.”
Gaining an accurate estimate of your property’s value isn’t impossible, however. If you’re keen to figure out what your property is worth, Lindeman suggests the following:
Option 1: Look at comparable sales
“These are the recent sale prices of similar properties in the area,” Lindeman says. Make sure you compare apples with apples by seeking out the recent sale prices of homes with similar features, such as the same number of bedrooms and bathrooms. “While this is the best indicator to use, there are still significant problems if there have only been a handful of recent sales,” he adds.
Option 2: Real estate agent appraisals
Estate agents will generally provide potential vendors with a free market appraisal of what they believe the property will sell for in current market conditions. “This is not a valuation,” Lindeman cautions. “Keep in mind that the appraisal may be designed to win the listing.”
Option 3: Free property price reports
“There is a plethora of free property price estimate reports available online,” Lindeman says. “These usually provide basic demographic information and housing market history of the suburb or post code, and a list of recent sales in the area.” He suggests sticking with reputable sources such as RP Data, Australian Property Monitors and Residex.
Option 4: Licenced valuer
A professional valuation by a licenced, qualified valuer will give you the best indication of what your property is worth, but you’ll need to part out with a few hundred bucks. If you’re trying to decide whether to sell or refinance your property, this might be a worthwhile investment to help you make a fully informed decision. Also don’t forget that if the property is an investment, the cost of obtaining a valuation should be tax deductible