Market Value

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Million $ suburbs decline as values fall: Cameron Kusher

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One ‘quick win’ for investors regardless of what and where they buy is finding a property that can be bought for less than it is worth. 
You might wonder how that is possible. It seems a little strange that people would sell property for less than it is worth, but it does happen and our buyer’s agents have snapped up plenty of opportunities for our clients over the years.  Here are 5 reasons why someone would sell a property below market value.
1. They don’t care
There are occasions where the seller does not care what the market value of a property is. In the case of a mortgagee-in-possession for example, where a lender has taken possession of a property, they typically just want to dispose of the property as soon as possible. The lender is mainly concerned with recovering the debt owed on the property. While they have a duty to maximise the price, a public auction usually would satisfy an obligation to obtain a fair price. Mortgagee sales are therefore often a good place to find a property below market value.
2. Ignorance 
Some people may simply be oblivious to the true, sometimes hidden, value of their property. For example, they may not have bothered to discover the zoning codes in the area, which may make their property worth more than similar houses in the area with a different zoning. Or another example could be a seller that lives interstate with little interest in keeping up to date with market prices, and doesn’t do enough research when setting a sales price.
3. They want to
Did you know there are some sellers that actually do not want to sell at market value? As hard as that may be to believe, there are rare occasions where this occurs. For instance, when there is a bitter dispute between partners (life partners or business partners) they may turn vindictive towards each other and would rather see the other side suffer than win themselves. 
4. The only choice left
For some people, selling below market value seems to be only choice left. For instance, the bank may be threatening them with repossession. Or they may have purchased elsewhere and either don’t want to take out, or cannot take out, bridging finance. For whatever reason, in their minds they believe the only choice left is to sell below market value. 
5. Emotional pressure
Some people do not deal with pressure very well, and in property there is often a lot of emotional pressure. If financial pressures are building up, people become irrational. For example, if the property has been on the market for a long time, the emotional price becomes too high and they would rather slash the price than have the uncertainty of not selling their home or investment property. 
Even if you can find a property below market value, that doesn’t automatically make it a good investment. All the typical research criteria still need to stack up! For more insight into the do’s and don’ts of property research, download your free copy of our latest ebook: <a href="https://wvw.momentumwealth.com.au/ResearchEbook?utm_source=Property+Observer&amp;utm_medium=Ebook&amp;utm_campaign=Ebooks" target="_blank">”How to find investment-grade properties using professional research principles”.</a> 
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How investors can find undervalued properties

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EXPERT OBSERVER
In previous instances when value growth has slowed or started to fall in Sydney and Melbourne the experience has often been that value growth has ramped-up in other capital cities. This makes sense given that as affordability deteriorates in certain areas of the country people start to turn their attention elsewhere.  
This week’s blog takes a look at the comparative value of housing in other capital cities and nearby markets relative to in Sydney and Melbourne.
<img src="https://www.corelogic.com.au/sites/default/files/2018-07/2018-07-23-blogimg1.png" alt="Dwelling value premium in Sydney relative to other capital cities" width="584" height="191">
  Sydney is the nation’s most expensive capital city housing market currently with the median dwelling value in June 2018 recorded at $870,554. The premium for the median dwelling value in Sydney relative to the other national capital cities is: 21% for Melbourne, 76% for Brisbane, 98% for Adelaide, 89% for Perth, 99% for Hobart, 101% for Darwin and 48% for Canberra. With dwelling values in Sydney now falling, the premium is reducing however, the cost of housing in Sydney relative to other capital cities is generally significantly higher than the long-term averages. In fact only Melbourne (42%) and Hobart (103%) have a current differential which is lower than the long-term average.
<img src="https://www.corelogic.com.au/sites/default/files/2018-07/2018-07-23-blogimg2.png" alt="Dwelling value premium in Sydney relatice to Regional NSW areas" width="592" height="194">
  Of course, people that potentially migrate out of Sydney don’t necessarily only choose to go interstate, they may also migrate intrastate. The above chart highlights the value differential over time between Sydney and those regions adjoining the city as well as the Capital Region (adjoining Canberra) and Richmond-Tweed (adjoining South-East Queensland). The premium for Sydney dwellings compared to those in the other regions highlighted is currently: 105% for Capital Region, 176% for Central West, 113% for Hunter Valley exc Newcastle, 29% for Illawarra, 52% for Newcastle and Lake Macquarie, 64% for Richmond-Tweed and 47% for Shoalhaven. Although values have increased in regional NSW over the past year, the rate of growth has slowed substantially, particularly within Illawarra, Newcastle and Lake Macquarie and Southern Highlands and Shoalhaven. These three regions have been seeing strong value growth over the past five years and they are also the only three regions in which the value differential is lower (substantially so) than the long-term average.
<a href="https://www.corelogic.com.au/sites/default/files/2018-07/2018-07-23-blogimg3.png" target="_blank">Click</a> to enlarge
<img src="https://www.corelogic.com.au/sites/default/files/2018-07/2018-07-23-blogimg3.png" alt="Dwelling value premium in Melbourne relative to other capital cities" width="590" height="193">
  Looking at the value differential between Melbourne and other capital cities, except Sydney, Melbourne’s median dwelling value of $716,774 is higher than all other capital cities. The premium for Melbourne is currently recorded at: 45% for Brisbane, 63% for Adelaide, 55% for Perth, 64% for Hobart, 65% for Darwin and 22% for Canberra. The value differential for Melbourne to all these capital cities is greater than the long-term average. In fact, notwithstanding the recent slight reductions due to Melbourne value falls, the value gap between Melbourne and Brisbane, Melbourne and Adelaide and Melbourne and Darwin is the largest it has ever been.  
<img src="https://www.corelogic.com.au/sites/default/files/2018-07/2018-07-23-blogimg4.png" alt="Dwelling value premium in Melbourne relative to Regional Vic areas" width="590" height="193">
  The above chart looks at the dwelling value premium for Melbourne relative to the major regional areas adjoining the capital city. Melbourne retains a significant premium in terms of housing costs relative to these areas. What is very different to what was shown in the chart for Sydney and Regional NSW areas is that outside of Geelong, the housing cost premium in Melbourne remains well above the long-term average. This suggests that while value growth has been rippling out of Melbourne to Geelong for some time, it has only just started to spill-out into the other three regions recently.  The current premium for Melbourne dwellings relative to the other regions is: 99% for Ballarat (80% long-term average), 100% for Bendigo (74% long-term average), 29% for Geelong (40% long-term average), 123% for Latrobe-Gippsland (89% long-term average). 
There are some explainable reasons why dwelling values in Sydney and Melbourne have risen so substantially over recent years. These include but are not limited to: strong rates of migration to the cities, dramatically increased foreign investors, low mortgage rates, increased demand from investors and much stronger economic conditions than elsewhere in the country. The latest data shows a pull-back in net overseas migration, slowing interstate migration to NSW and Vic, foreign investment has reduced, fewer local investors and reduced availability of credit for housing despite still low mortgage rates. Sydney and Melbourne still have comparatively strong economies but we have started to see the economic performance elsewhere improve. Sydney and Melbourne have also seen a dramatic reduction in housing affordability over recent years as dwelling values have increased much faster than household incomes. The value gap between Sydney and Melbourne and other regions doesn’t necessarily mean that value growth will pick-up elsewhere where dwelling values are much lower. However, if other areas of the country can improve their economic performance, the lure of much more affordable housing may be enough of a lure to see an increasing number of Sydneysiders and Melbournians to migrate away from these two cities to other areas of the country.
Cameron Kusher is a property research analyst for CoreLogic
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Value differential of different capital cities in Australia over the years: Cameron Kusher

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Melbourne leads the 20 year house price growth with annualised 8.16% price growth, but Darwin wins over past decade, the latest data from Onthehouse suggests.
It is the same outcome for units too.
The latest statistics reveal that recent annual growth in the Melbourne house market shot up 8.18% in the year to May 2015, which is a dollar increase of about $55,000.
While this is a far cry from the $160,000 value growth in its Sydney counterpart, it represents a rapid increase in values.
Table 1 presents the results for our major markets, for May 2015.
<a href="/images/2015/07/24/Table_1.jpg" target="_blank">Click to enlarge</a>
<a href="/images/2015/07/24/Table_1.jpg" target="_blank"></a> <img src="/images/2015/07/24/Table_1.jpg" alt="" width="747" height="549">
Growth in Melbourne seems to have peaked at the beginning of 2014, with growth gradually trending down from this peak, Eliza Owen at onthehouse reports.
"It is still unclear if growth in Sydney has peaked," she said.
<a href="/images/2015/07/24/G1_Sydney_Melbourne_Growth_Trends.jpg" target="_blank">Click to enlarge</a> - Sydney and Melbourne trends
<img src="/images/2015/07/24/G1_Sydney_Melbourne_Growth_Trends.jpg" alt="" style="line-height: 1.3em;">
 
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