Help! Change in Median House Prices, I am confused!

Discussion in 'Investment Strategy' started by Harry30, 17th Oct, 2018.

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  1. QldKoolies

    QldKoolies Well-Known Member

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    Yes. Where there is activity in the market they will be within 10-20k of each other. I’ve had this done btw.
     
  2. kierank

    kierank Well-Known Member

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    Is that you, Nathan?
     
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  3. kierank

    kierank Well-Known Member

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    I am talking $400,000 :eek:
     
  4. QldKoolies

    QldKoolies Well-Known Member

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    Fair enough i'm talking 700-low mils, different price range ;)
     
  5. QldKoolies

    QldKoolies Well-Known Member

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    But to be fair, i’m not sure what market you’re in if your variance is $400k, thats way above anything im familiar with in SEDQLD up to 3mil.
     
  6. Perthguy

    Perthguy Well-Known Member

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    By definition, market value is informed seller, informed buyer, no pressure, open market. Take any of those away and the sale can be below market value.

    For example, an off market sale can be below market value because the property was not put to "the market"

    A forced sale can be below market value because the seller is forced to accept a low offer due to an impending deadline by the bank. This artificially restricts the time frame for selling where with a relaxed timeframe the seller would have achieved a higher price.
     
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  7. kierank

    kierank Well-Known Member

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    The $400,000 was the difference in the valuations :eek:.

    Two years ago, my bank did a valuations on a property in Brisbane. The valuer advised $x.

    I argued with them and they wouldn’t take any notice. I am now selling that property and am considering an offer that is 40% above that valuation. I will probably reject that offer as I believe fair market value is 50% above that valuation.

    40% to 50% growth in Brisbane in the last two years? I wish!!!

    Nope, valuer got it way wrong IMHO
     
  8. Jimmyay

    Jimmyay Well-Known Member

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    Depends on product. I live not far from that suburb. Standard older 60s houses on 600sqm blocks were going for around $1.1-$1.2m last year at the peak. Now they scrape $1m, sometimes $950, sometimes less if the block is not ideal.

    The price people were willing to pay to speculate on the land has come right off as "savvy investors" who queued up to pay top dollar have left the scene.

    Well renovated and well located properties of a product people want to live in, school zone, bayside etc with their families and do not work to the property have suffered less but have still come off a fair bit in the last 6 months and the declines are accelerating as the market finds a new level. 5-10%. however within this some properties and streets still go exceptionally well. some stuff just sticks around for ages...….usually means it's overpriced.

    Its also a sure sign when more and more sold prices are "undisclosed" or " contact agent" - for average run of the mill properties - it is a sure sign the property went for a cheap price, lower than the agent wants the market to know. There is loads of this at the moment.

    The median indicators are 3 months behind and market conditions are somewhat poorer than publicised. It doesn't mean the end of the world or a long term purchase decision shouldn't be considered, but it is a fact and should be a factor in negotiations.

    Do your homework. Medians can be a good guide but only if you know market well and know how individual properties have tracked the median and being able to compare like with like. It can be tricky.

    Many people are going for private sale rather than auction at the moment. When 50% of properties actually proceeding to auction are not selling at auction (with a good number being withdrawn prior or sold prior privately) and those that are selling not getting great prices I can't understand Victorians' obsession that properties have to be auctioned and that this is the way of getting the best price. It isn't a suitable method of sale for all properties or all phases in the market.
     
    Last edited: 18th Oct, 2018
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  9. kierank

    kierank Well-Known Member

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    For me, market value is the amount for which something is sold for on a given day.

    If I am selling a property and I receive three offers on the same day, for example:
    • Offer A - $1M, cash, 30 day settlement
    • Offer B - $1.2M, subject to finance, 30 days settlement
    • Offer C - $1.5M, subject to FIRB approval, subject to finance, 60 day settlement
    To me, market value will be whichever Offer I accept.

    Or the off market sale could be above your definition.

    But not mine, whatever it sells for on a day is the market value for that day.

    Or the forced sale price could be above your definition.

    But not mine, whatever it sells for on a day is the market value for that day.

    To me, market value is a fairly useless concept :D.
     
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  10. Perthguy

    Perthguy Well-Known Member

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    I don't disagree that market value is relatively useless, but it is a defined and accepted concept. Just like median house price, which is also a very useless concept.

    The most frequently used definition of value is market value. It is defined in both global and UK property valuation standards as:

    “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

    Property Market Value Definition from Financial Times Lexicon

    If a house on the open market sells for $580,000 but the sale falls through and the seller is forced to sell (due to a deadline for the bank) the same property for $480,000, it would be hard to argue that $480,000 is market value. The definition of market value includes "without compulsion" so if the seller is compelled to sell then, by definition, the transaction is not at market value.

    I know it is semantics but if you can pick up some profit margin when you buy then you will be ahead of the curve-ball. The relatively invalid concept of "market value" is one tool that can assist with that, as is the almost useless concept of "median house price".

    They are all just tools in the toolbox. They will either be useful to help you make additional profit or not.

    Personally, the nebulous concept of market value has helped me to make addition profit, so I will stick to the accepted international definition. If it doesn't help you make money then feel free to disregard ;)
     
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  11. kierank

    kierank Well-Known Member

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    @Perthguy, so that we don’t “start a bushfire”, let’s not debate whether off-the-plan price is market value or not.

    Willing seller, willing buyer, arm’s length transaction, proper marketing, ...
     
  12. Perthguy

    Perthguy Well-Known Member

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    It is if that the price on the day the contract is signed ;)

    2 years later is another story! :confused:
     
  13. Sackie

    Sackie Well-Known Member

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    :p:p

    birch.JPG
     
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  14. albanga

    albanga Well-Known Member

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    What did the agent say the value was prior to getting the listing? And what did they say afterwards?

    It’s the most classic REA technique in the book. It’s called “conditioning” look it up.
    I’ve heard REA’s quote 10% drops in a booming market.
    The difference is the market in Melbourne is generally correcting so they have that to hide behind.
     
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  15. Sackie

    Sackie Well-Known Member

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    I could write a book on REAs and how they 'really' operate.
     
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  16. kierank

    kierank Well-Known Member

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    Are you agreeing with my definition now? :eek:

    Someone, call Triple Zero and do it quick!!!

    Bushfire! Bushfire!!
     
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  17. Perthguy

    Perthguy Well-Known Member

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    Sadly this is true. A mate just settled a Melbourne property as a seller. Was initially quoted $650,000 and sold for $580,000. This was a "reputable" agent as well :rolleyes:
     
  18. kierank

    kierank Well-Known Member

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    Is that a photo of you @Leo2413?

    You have an uncanny resemblance to someone who I have a lot of respect for, especially with property investments :D.
     
  19. kierank

    kierank Well-Known Member

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    How young/green/inexperienced do you think I am?:D

    Bit late. My book is well on its way. Currently writing page 1,028.

    I will send you a completed copy for peer review, prior to go to print ;)
     
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  20. Sackie

    Sackie Well-Known Member

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    1000 pictures I presume...:D
     
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