Chapter 1: What is the main topic discussed in this episode?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia. And welcome to another episode of The Real Estate Podcast, available on iHeartRadio and also Spotify and Apple Podcasts, or wherever you get your podcasts from. It is a Tuesday the 7th of June for 2022. The long weekend has come and gone.
We are into another short week and coming up we're going to be talking with Anna Porter from Suburbanite. Having a look at house valuations this morning among other talking points. If you're celebrating your birthday for the 7th of June today, you're in pretty good company. Tom Jones is turning 82 years old and I think he's still touring. Go Tom.
Liam Neeson, the big tough guy, is turning 70 today.
Chapter 2: What is the significance of house valuations in real estate?
And, oh yeah, Anna Kournikova. Do you remember her? She was the Russian tennis star. Back in the day, she was continuously trending in today's equivalent of social media as a major influence, I guess, as well as a tennis player. And she is turning 41 years young today. It's the main centre forecast with propertybuyer.com.au. And checking in around Australia for your weather today.
First, we go to Sydney expecting a fine day and a high of 17 degrees. Melbourne showers. It's going to be cool again. What else is new? 11 degrees today. Brisbane expecting a little bit of cloud, but it's going to be fine. And a high of 19 degrees. Good morning to you in Perth. That is the place to be. Once again, blue skies and expecting a high today of 21. Enjoy your morning coffee.
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Well, valuations on any given day when you're looking to buy a property, whether it's a home to live in or an investment property, is a pivotal piece of due diligence that you cannot cheat on.
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Chapter 3: How do interest rates and inflation impact property values?
There are sound formulas to follow, which is all part of good research now to practice. And to help explore this further, let's welcome into the podcast Anna Porter from Suburbanite. Good morning, Anna. Great to have you on the podcast. My pleasure. Well, I've asked all commentators this since the new Labour government came into power.
What do you think is likely to yield around the property market? What do you reckon?
It's going to be interesting to see how the government handles interest rate rises and inflation because those are things that will affect the market because it makes everything more expensive, including the mortgages. And if they don't manage that well and we see a lot of price pressure come in and affordability pressure, the big markets like Sydney and Melbourne certainly will feel that.
The more affordable markets, not so much at Labor currently has a little bit of policy in and around helping first home buyers get into the market by looking at between 30 to 40% stake in the property. The government will take that stake in the property as sort of a bit of a deposit or a loan scheme. There are similar programs already running in WA and Tasmania that are relatively successful.
It'll really come down to how many they make available. They're talking, I think, 10,000 of those packages available. So that will help some, but not all. So the devil will be in the detail there.
And one of the core things that you do as a business is valuations. What, if anything, Anna, should people be paying closer attention to with the current market that we're living in around property values?
We're certainly starting to see a fair disparity forming between properties that are renovated and ones that are not renovated in terms of value. And that is really because the building industry is struggling and the cost of material and the availability of labour and builders is becoming very, very challenging.
So the homes that already have had that done are starting to see that premium, whereas the ones that haven't are getting price discounted and buyers are getting a lot more picky. So we certainly think that's something that buyers and sellers need to be really aware of as to how that plays into the value of properties.
Yeah, and there will be people who will say that they do their own market research and know markets well, but the moment in time, for example, where we are right now with shifting parameters It always has a place and an important role when buying.
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Chapter 4: What should buyers consider about property renovations?
So sales, evidence that a valuer or a buyer might rely on that are three to six months old were irrelevant within three to six months. You had to be much more aware of what was selling in real time. And now in Sydney and Melbourne, we're seeing the opposite swing where things are starting to cool, clearance rates are dropping,
And it's actually the opposite, that properties may not achieve those premium prices they did three months ago. So it's about knowing what's happening in real time and having a finger on the pulse.
Yeah, real time. Yes, exactly. And also the market correcting the time it takes to get valuations done now. must be a factor. People have more time to do their due diligence because the pressure is now easing to rush through quickly those valuations. Does that relax the process for buyers and at the same time offer more opportunities to them?
Yeah, so every state has slightly different rules and processes around this. For example, Adelaide and Brisbane, you do get 10 to 15 days often for your due diligence to do that valuation and get the finance approved. That's pretty standard in the contract, so buyers have a lot of protection.
But in markets like Sydney and Melbourne and some of the other ones as well, it is very hard for buyers to have the time to do that when the market's so hot and a lot of contracts are unconditional. So it does put a lot of pressure on buyers and we have seen over the last few years that has been skipped in the process by a lot of buyers and sometimes to their detriment.
So now it does give buyers that power back and it helps them have the time to make really good decisions and go through the process in an appropriate and a robust way, which every buyer should be doing.
And talking of the buyers, what do you say to people who have a percentage of gut intuition when buying? They might cover off like the ABC's evaluation, but there is this margin of 20 to 30 percent for them to operate in the space of instincts. Is there a place for instincts when the market can be ever evolving and changing?
Look, there certainly is. And as a valuer, it's kind of hard to say that because we're very analytical and mathematical. But buyers often say to me, you know, this house, I just love the feel of it or the neighbourhood feels good. And how can you value that? How do you put a value on that? But the reality is, as a valuer, our job is to interpret those feelings.
feelings those things that make a house feel good should be quantifiable so when that buyer uses that gut instinct that says you know my gut says this is just a nice neighborhood or a nice house the natural light is beautiful as it comes in in the morning i can sit and have my coffee on the veranda
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Chapter 5: How can market conditions affect property valuation accuracy?
And looking at rentals, we know the market in this space has been rising and yields in some parts of Australia like Perth, Darwin, Hobart and Adelaide to name a few have performed really well. What do you think is likely to happen in the next 12 months across the country?
I think we'll see a two-speed market form. So the big markets that are quite unaffordable will start to see a bit of downward pricing trends because of the inflation and interest rate rises putting some pressure on those markets. But there are a lot of markets that are still very affordable. So your smaller capitals like your Adelaides, Brisbane's, Perth's,
where you can still get a freestanding house in a great location for five or six or $700,000, they won't be as heavily impacted by these changing economic conditions and they're still in a really strong position to grow in value. So we're going to see a real disparity there.
And having a look at Canberra's median price of $700 a week for rental income, that's a really great one to highlight because it's seen a growth of 16.7% on 2021. Again, what's your pick for a city like Canberra looking ahead to March 2023, for instance?
Canberra's had a staggering amount of growth over the last few years, which is fantastic. I remember a couple of years ago, properties were in the 600s and now they're up around the million dollar mark. So it's great for anyone that's been living there or invested in Canberra and the rental market has been incredibly strong as well.
However, every market is cyclical and it is getting towards the peak of its cycle. So I think we'll start to see a bit of a plateau in pricing in Canberra, but the rental market is still quite undersupplied. So I don't think that's going to stop seeing increasing and being tight just yet.
Anna, great to have you on the show this morning. Thank you for your thought-provoking, informative comments, and we must get you back another time. Be my pleasure. We connect you to the best real estate information across Australia, The Real Estate Podcast.
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