Bank valuations coming in lower Australia wide
- Thread starter hobo-jo
- Start date
Just a couple of comments:
"Developer's sale valuations" often do not reflect the true market worth of a property. There was, and is, always a premium paid for buying brand new & shiney. Which is why we avoid them.
I looked at a brand new 2brm unit for a client just a few weeks ago. There were 8-9 units left out of a total of 57 in a new development. The developer had previously listed this particular unit at $1,165,000 and reduced it to $995K and then to $985K when I expressed interest. Nothing wrong with the unit, but the market had softened and the developer wanted to move on. However, if I as one of the other new owners had paid full list price for one of the other 49 units, I would not have been happy.
"new estates on the outskirts of Australian Cities" are always the first to suffer if there is a downturn in the market. Distressed vendors selling their 1 year old homes are often competing with the builder/developer selling new product at a discount, just a few streets away. Which is why we avoid them like the plague.
"Off the Plan" has always been fraught with danger. Who knows what the market will be like and whether or not a purchaser can get finance 18 months from when they sign a binding contract? Which is why we avoid them like the plague.
I have not experienced any vals coming in low for any of the properties we have purchased for clients.
I think your comment that
"Developer's sale valuations" often do not reflect the true market worth of a property. There was, and is, always a premium paid for buying brand new & shiney. Which is why we avoid them.
I looked at a brand new 2brm unit for a client just a few weeks ago. There were 8-9 units left out of a total of 57 in a new development. The developer had previously listed this particular unit at $1,165,000 and reduced it to $995K and then to $985K when I expressed interest. Nothing wrong with the unit, but the market had softened and the developer wanted to move on. However, if I as one of the other new owners had paid full list price for one of the other 49 units, I would not have been happy.
"new estates on the outskirts of Australian Cities" are always the first to suffer if there is a downturn in the market. Distressed vendors selling their 1 year old homes are often competing with the builder/developer selling new product at a discount, just a few streets away.
Which is why we avoid them like the plague."Off the Plan" has always been fraught with danger. Who knows what the market will be like and whether or not a purchaser can get finance 18 months from when they sign a binding contract? Which is why we avoid them like the plague.
I have not experienced any vals coming in low for any of the properties we have purchased for clients.
I think your comment that
is just silly. The definition of "market value" is fully covered by a price being paid at auction, under the hammer, after a 4-6 week public auction campaign.
Or you could look at it from a different angle,from what i'm told with the inner city Brisbane Market,some are down over 15%,the 2011 jan flood areas are in the 40% range,or as a Lady Agent who lives down the street tells me,and who sells in the mill plus range tells vendors upfront,unless you are desperate don't list in this stage of the cycle, because if there is a oversupply of listings and no ones buying the price will only go one way..
I have said for as long as I've been on this forum that outer suburbs are most prone to issues in a downturn.
There's a reason why yields are higher in these areas and that is to compensate investors for the additional risk they bear. It's the same reason why Greek bond yields are very high too relative to American and German bonds.
There's a reason why yields are higher in these areas and that is to compensate investors for the additional risk they bear. It's the same reason why Greek bond yields are very high too relative to American and German bonds.
hobo - a majority of the report is situated in Melbourne, but yes, obviously there will be cases nation wide of a similar circumstance.
this is no different than previously - in fact, i distinctly remember this happening here in 2006 - peak boom time.
of course outer fringe lying areas are having trouble - they're not exactly "top tier" investments unless you can see upgrades to private and public infrastructure coming - but then that's speculative. sheet, they have trouble during the GOOD times....
that dude on that blog is grabbing hod of any negative article and sensationalising it. it wouldn't surprise me if he's a TT reporter with a private barrow to push.....
this is no different than previously - in fact, i distinctly remember this happening here in 2006 - peak boom time.
of course outer fringe lying areas are having trouble - they're not exactly "top tier" investments unless you can see upgrades to private and public infrastructure coming - but then that's speculative. sheet, they have trouble during the GOOD times....
that dude on that blog is grabbing hod of any negative article and sensationalising it. it wouldn't surprise me if he's a TT reporter with a private barrow to push.....
The tenants in the outer suburbs aren't compensating anybody, they only considering their own interests and are paying the lowest rent they can. The "cause" of the better yield is the house prices are lower because owner occupiers aren't bidding against each other for the properties.
Agreed vaughan.
The outlying renters aren't paying over the odds in increased rent to allay Landlord's risk profile. They couldn't give two hoots about the Landlords, nor their risk profile.
The supposed higher yield, and I'm yet to be convinced of it, if it is true, would be the fact that the denominator in the equation, the price, is proportionately lower with outlying areas.
The outlying renters aren't paying over the odds in increased rent to allay Landlord's risk profile. They couldn't give two hoots about the Landlords, nor their risk profile.
The supposed higher yield, and I'm yet to be convinced of it, if it is true, would be the fact that the denominator in the equation, the price, is proportionately lower with outlying areas.
What is not covered in the article but is by Propertunity here is the difference between sale valuations /developers valuations and Current Market Value/valuations.
Before they begin marketing the complex a developer will go to a large Valuation firm that has an arm that does valuations for developers.
They will look at other developments and see what price other developers sold the apartments for off the plan. IT IS NOT A valuation for mortgage security purposes for an individual unit.
The valuations per unit will invariably be the price they sell the shiny new apartment for off the plan (with stamp duty savings).
When it is complete I come along and do a valuation for the bank for Mortgage Security Purposes as an individual unit.
The moment someone moves in it is not shiny and new, it does not have the marketing jingoism to accompany it and will attract full stamp duty like any other apartment for sale not off the plan.
If it is a 70sqm 2 bed one bath apartment with carspace I will look at what 2 bed one bath apartments are actually selling for on the second hand market. I will analyse the rate and apply itto the new (soon to be second hand) apartment making required adjustments.
Low and behold the valuation will invariably (at the moment) be less than wat the savy investor paid for their off the plan apartment. It is not a fire sale valuation, it is a valuation that reflects the value of the apartment in the CURRENT MARKET not what it sold for at a premium ages ago.
I have only twice seen an off the plan apartment worth what it has sold for on the day of sale. Generally they are 10-15% above what you can buy a second hand apartment for (with full stamp duty). Usually in the next 18-24 months whilst the aparment is being built the market has risen. So my valuation figure was usually what they paid for it off the plan when I value it at settlement, sometimes I value it higher as the market has risen heaps, but this is rare.
Unfortunately, at this point in time, the market has been going down for over a year in Melbourne.
If you bought an apartment in mid to late 2010 off the plan at a premuim to the then current market value for the same second hand apartment and it is comming up for settlement after the market has fallen 10-20%, ... well ouch is all I can say.
I trust this clarifies yet another valuation misconception.
cheers,
RightValue
Before they begin marketing the complex a developer will go to a large Valuation firm that has an arm that does valuations for developers.
They will look at other developments and see what price other developers sold the apartments for off the plan. IT IS NOT A valuation for mortgage security purposes for an individual unit.
The valuations per unit will invariably be the price they sell the shiny new apartment for off the plan (with stamp duty savings).
When it is complete I come along and do a valuation for the bank for Mortgage Security Purposes as an individual unit.
The moment someone moves in it is not shiny and new, it does not have the marketing jingoism to accompany it and will attract full stamp duty like any other apartment for sale not off the plan.
If it is a 70sqm 2 bed one bath apartment with carspace I will look at what 2 bed one bath apartments are actually selling for on the second hand market. I will analyse the rate and apply itto the new (soon to be second hand) apartment making required adjustments.
Low and behold the valuation will invariably (at the moment) be less than wat the savy investor paid for their off the plan apartment. It is not a fire sale valuation, it is a valuation that reflects the value of the apartment in the CURRENT MARKET not what it sold for at a premium ages ago.
I have only twice seen an off the plan apartment worth what it has sold for on the day of sale. Generally they are 10-15% above what you can buy a second hand apartment for (with full stamp duty). Usually in the next 18-24 months whilst the aparment is being built the market has risen. So my valuation figure was usually what they paid for it off the plan when I value it at settlement, sometimes I value it higher as the market has risen heaps, but this is rare.
Unfortunately, at this point in time, the market has been going down for over a year in Melbourne.
If you bought an apartment in mid to late 2010 off the plan at a premuim to the then current market value for the same second hand apartment and it is comming up for settlement after the market has fallen 10-20%, ... well ouch is all I can say.
I trust this clarifies yet another valuation misconception.
cheers,
RightValue
this post should be given to anyone about to sign up for an off the plan purchase,
the developers use those vals beautifully , fool many many people
and not only are the properties in the article off the plan/developers stock they are in new estates which is a double mistake
investors are behind before they even start and then the growth is likely to be horrible as well for at least 10 years.
these effect ave growth rates , medians for cities etc, that is why if u can't smash the ave figures as an investor u really should not be in the game at all.
they wouldn't and then current stock would explode in value
there is nothing wrong in buying off the plan imo it is just that 90% is way overpriced, correctly priced i have little problem with it especially if it is for ppor.
i am against buying in new estates unless except under very rare circumstances that i won't bore u with now
the double whammy of buying poor overpriced stock in new estates is something to be avoided at all costs
Hi hobo-jo
In a previous thread
http://www.somersoft.com/forums/showthread.php?t=71363&page=11
you posted the following from Fitch Ratings
Also delinquencies on the rise:
http://macrobusiness.com.au/2011/05/...ars-above-gfc/
30+ day delinquencies at record levels (above the GFC), 90+ days aren't there yet but rising sharply.
You went on to draw this conclusion,
Clearly not all is well under the surface.
This is the latest commentary and statistics from the Fitch Ratings
"Home loan delinquencies have strongly fell for the second consecutive quarter with new jobs boosting residents' ability to re-pay their home mortgages, Fitch Ratings said."
http://au.ibtimes.com/articles/266046/20111213/australia-s-home-loan-delinquencies-narrow-fitch.htm
You being a realist rather than a bear what is your conclusion now that the statistics that you introduced are heading in the opposite direction?
LOL Thought it might have been.
Nothing to see here, quickly move along.
Love your modus operandi, find a bit of gloomy news, post it with links,
then draw a sweeping conclusion such as,
Clearly not all is well under the surface.
Can't see how you can apply the label "clearly" as the report only covers a sliver of the mortgage market and only applies to the last few years.
If the first report is sufficient to draw conclusions from why is the last report insufficient to draw conclusions from?
OH I mean other than it does not conform to your bearis... whoops I mean
realistic outlook.
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That's the only way,you can read all you want from several other village idiots from New York too Ninbin and not one has a clue,..
I'm sure I could find a single quote of yours and twist it as well, but why waste my time?
The "dinkum index" has declined from peak delinquencies, but is still at elevated levels. We may even see it drop further with the recent rate cuts, are you going to make a song and dance then as well?
Nothing goes up or down in a straight line.
Auction valuation Q & A -
Joe Blogs is interested in a property in city X.
He does his due diligence and finds several comparable sales all selling between 490-510K. He also orders an independent valuation with valuer X which comes back at 500K (or 490-510 if a range is given).
On the day, he quickly finds that 2 emotionally charged (and possibly less diligent) bidders jack up the price and the property is sold for 550K.
The winning bidders lender then orders a valuation for mortgage purposes with valuer Y.
Question: What should this valuation come in at and why?
Joe Blogs is interested in a property in city X.
He does his due diligence and finds several comparable sales all selling between 490-510K. He also orders an independent valuation with valuer X which comes back at 500K (or 490-510 if a range is given).
On the day, he quickly finds that 2 emotionally charged (and possibly less diligent) bidders jack up the price and the property is sold for 550K.
The winning bidders lender then orders a valuation for mortgage purposes with valuer Y.
Question: What should this valuation come in at and why?
Lifted from the REIWA website (glossary section) ;
Market Price : The price actually paid, or to be paid, for a property. It differs from market value in that it is an accomplished fact, whereas market value is and remains an estimate until proved. Market price involves no assumption of prudent conduct by the parties concerned.
Market Value : As defined by the courts, the highest price estimated in terms of money which a property will bring if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used and assumes a willing buyer and willing seller.
