Is it still possible to find ‘value’?
For those looking to purchase a property, it has become incredibly difficult to find great value options due to rapidly increasing prices. The astonishing pace of growth is evidenced in CoreLogic data for March, which identified house values increased by 3.3% and units 0.7% for the month.
Limited stock, combined with historically low borrowing costs, has armed would-be buyers with an enormous amount of extra firepower by way of increased borrowing capacity, which is being comfortably utilised across the market. In a competitive market, are there still options for buyers that represent value – and where are they?
If you’re looking for a house, it is unlikely you’ll find anything which will represent great value buying. This part of the market is red hot, super competitive and to be the successful bidder at auction you’ll need to determine your own value for the property rather than relying on any datapoints for decision making. Having done this once myself, the benefits long-term are fantastic; however, a short-term risk of valuation shortfall can be challenging to manage.
Valuation reports completed by third party valuers on behalf of lenders are reliant on historical data, which, when values are increasing rapidly, can come up short of purchase price due to lack of comparable sales, or a similar property recently selling for a lower price when the market has increased significantly since. During the first quarter of 2021, house values increased by 6.9%, illustrating how data only a month or two old can be completely irrelevant to current prices.
If you know where to look, real value buying can be found within the multi-unit market. Unit values increased by 2.3% during the first quarter of 2021, setting them on track towards an annualised growth rate of 9.2%. The tricky part for buyers is that to find value, you need to be able to identify which projects have unique selling features and are backed by project teams with a track record of delivering on their vision.
Units refers to multi-unit dwellings including both apartments and townhouses. To identify value, buyers need to be comfortable evaluating the site location, calibre of project team, floor plan and price. This involves detailed research to understand the types of people who live in the area and if there is new infrastructure proposed which could add value to the area. Live sales data for projects I work across has shown during the last 12 months, both apartments and townhouses can perform strongly. Their more moderated rate of growth comparted to houses leaves plenty of room for values to either maintain their current rate of growth sustainably or start to increase at a faster rate, with both providing plenty of potential upside.
Editor’s note: Sam Dodimead is the listing agent for a number of developments which include multi-unit dwellings.
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