Think you know how much your home is worth? Research suggests a lot of Aussies are well off the mark
One quarter of Australian home owners either over or underestimate the value of their property by more than 20%, a study conducted recently by the Reserve Bank of Australia has found.
On average, home owners appeared to have a good idea of the value of their properties, with half of people estimating the price of their home to within 11% of the actual average market value for their area, the study, Home Price Beliefs in Australia, conducted by Callan Windsor, Gianni La Cava and James Hansen in the RBA’s economic research department, found.
However, the study noted the average results were partly due to offsetting numbers of home owners who overvalued and undervalued their properties.
“At any point in time, some postcodes have self-assessed valuations that appear high relative to market-inferred prices while some postcodes have valuations that appear low relative to market-inferred prices, on average,” the report noted.
Home owners in Sydney and Brisbane tended to overvalue their properties on average, while Melbourne home owners on average undervalued their properties.
Factors such as the owners’ age, the length of time they had lived in their home, and local area characteristics such as regional unemployment rates had the potential to bias the owners’ views on the value of their property, the study showed.
In general, older home owners were more prone to overvaluing their property.
People who had lived in their home for longer were less likely to be overly optimistic about the value of their property, which the study put down to the owners’ knowledge of the market and experience.
People who lived in areas of high unemployment tended to undervalue their homes.
The study also found that home owners who overvalued their property spent more and were more highly leveraged than people who had a more realistic view of their home’s value. Home owners who undervalued their properties spent less and carried lower levels of debt.
The authors said the findings showed beliefs about home values affected household financial decisions.
