A Perspective On Bank Valuations

Posted by Daniel Joseph

Don’t get emotional, but this is our last blog post of 2016. I trust that the forthcoming festivities will provide a much needed distraction, given the upcoming weeks without this blog.

In my time assessing the Australian residential property market I’ve realised the importance of sentiment to the performance of a market, and the degree to which ‘news’ media dictates that sentiment.

Over the past few months we’ve been busy compiling performance data on property we approved in Sydney back in 2009. Part of that process involved trawling through settlement valuations. Here’s just one of the many examples we uncovered:

In 2009 we settled an apartment project in Parramatta:

Two bedroom apartments were $450,000, a price our research indicated was fair market value
Apartments were large, averaging in excess of 85 square metres
Settlement valuations averaged $420,000 – 6% below our assessment

In addition, the valuation firm noted:

At present, we note a considerable amount of medium density development within the Parramatta CBD. The well-publicised state of the residential market in western Sydney has further dampened demand
In general terms, there appears to be a large supply of new residential units with little evidence of the supply being absorbed in the immediate future
We consider that if the unit was to be resold in the medium term, there is a higher than average risk that value may fail to achieve its advised purchase price

Sound familiar? Here’s a headline from October 2016. You can’t make this stuff up!

I wondered why I was feeling a sense of déjà vu in 2016!

Here’s the kicker: between 2009 and 2016, the value of these properties increased by $250,000, that’s a return on investment (your 10% deposit) of 455%. Now that’s a positive way to end the year!

From the team at Blue Wealth, have a happy and safe Christmas and New Year!

Posted by Daniel Joseph, on 20th Dec 2016