How to determine property market values by using comparable sales (Ep.102)

In this week’s episode, Dave, Cate and Pete take you through:

1. 1. Valuation methods. The Property Professor takes you through 3 of the most common methods of evaluating the price of a property: comparable sales, summation and income/capitalisation. Watch the special video below!
   2. Finding comparable sales. The main attributes that buyers should itemise to compare the subject property to are: similar location, land size, building size, building condition and the recency of sale. The trio discuss the ins and outs of what to be looking for in order to determine whether a sale is ‘comparable’.
   3. Additional property attributes that can impact value. Other factors that could impact demand for a property (and therefore competition) include: topography, environmental factors, accessibility, utility services, town planning, zoning, other restrictions, improvements to the property, the potential for alternate use (commercial for example), views, orientation and shared ownership of common areas.
   4. How to value a property. Each component of a property can be boiled down to dollars and cents to arrive at an end figure – EG what you are willing to spend! The trio take you through how to attribute monetary value to the various components of the property and which factors are most important. The Property Buyer shares a hot tip when it comes to properties on main roads vs quiet streets. Don’t forget, finding the similarities between properties is easy, the tricky part is identifying the differences and placing a value on those.
   5. Case study….be sure to watch the video to get the most out of this educational experience. In true lecturer style, the Property Professor takes you through a real-life example of finding comparable sales for a property going to auction on Saturday 22^nd of May. Cate and Pete value the property and the expected result on auction day, with the disclaimer that there may be additional factors identified after walking through the property.
   6. When is comparable sales methodology a challenge or impossible? The trio discuss the circumstances that may cause some obstacles for comparable sales analysis. The Property Planner issues an important reminder that comparable sales cannot be taken as gospel.
   7. How to deal with anomaly sales results. When you come across a sale that has a surprising result, it is important to understand the reasons behind it and the circumstances of the sale. What bank valuers often don’t take into account is real estate agents with excellent digital marketing skills, irrational bidders and tenants that hinder access to the property. A call to the selling agent can provide clarity behind the anomaly results.
   8. The invisible factors that buyers can miss. The trio outline the facets of evaluating a property that may not be readily apparent through online searches and visiting an open for inspection.
   9. How far back in time can you go before the sales aren’t comparable? This largely depends on whether the market is a buyer’s market, a balanced market, or a seller’s market. The trio share their tips on how to manage comparable sales if you have to go back further than is ideal.

Market insights

• Stamp duty and the VIC budget. For Victoria, a new premium for stamp duty was announced for property transactions above $2million, increasing the duty payable for contracts entered into from 1 July 2021. The trio share their thoughts on this ‘lazy taxation grab’ from the government and the potential impact on both residential and commercial property investment in Victoria.
• Sydney prices taking flight. Latest figures from CoreLogic see growth in Sydney housing values reaching 9.07% in the last quarter. Annualised, that is 40% when compounded. The Sydney market is very hot indeed, but we do expect the heat to dissipate? Taking the lead from the other capital cities may not be an accurate gauge.

Resources:

• PIPA property report – Stamp Duty – July 2020
• How to assess and select property like an A-Grade buyer’s agent (Ep.7)
• Interpreting data to uncover an outstanding property and location– and how to sort the gold from the lies, damn lies and statistics! (Ep.8)
• Misunderstanding what makes a good property investment – No.2 of the top 7 Critical Mistakes (Ep.32)
• Dissecting 10 years of CoreLogic data – capital cities and regional areas (Ep.42)
• How to spot an up and coming suburb – understanding demographics and statistics (Ep.61)
• How to succeed with Property and Create your Ideal Lifestyle
• Mortgage Strategy 101 – YouTube video series.

Cate Bakos – The Property Buyer’s Golden nugget: spare the 10 minutes and watch the video presentation that Pete’s done and how he goes through analysing each property, it’s a good demonstration. It’s something that all buyers can do. It will give you an insight on how to do this like a buyer’s agent, a valuer and a Property Planner.

Peter Koulizos – The Property Professor’s Golden nugget: it’s not just about comparing apples with apples, you can’t compare a granny smith apple with a pink lade, and an apple pie with a fresh apple. If you’re looking to spend a million dollars, it’s worth spending a few hours on working out what’s it’s really worth. You risk missing out on things if you just take a glance at it.