Written by Mark Thomas
3 July, 2019
The recent 0.25% drop in interest rates is cause for a 8% rise in property prices
There are many drivers of property price. One big cause is the interest rates. By looking at the rent you receive and converting this to a yield you can then make this analysis.
A 2 bedroom unit in Chatswood trades on a yield of 3.2%. If this were to move in line with the interest rate drop the unit price could shift up by 8%.
Being able to accurately assess a property’s value is one of the most important skills anyone who is about to embark on a real estate journey can possess, particularly if you aim to come out on top financially and emotionally.
However, it’s definitely not as easy as it seems. Tales of agents under or over estimating the value of properties are the talk of the water cooler around the country. Sellers told they can achieve a certain sale price only to have to settle for up to 30% less. Buyers being drawn to a property that has been advertised in their price range then having their seemingly fair offer rejected.
Here are some useful tools to help you understand how to price a property. Some of these factors are qualitative ie value for money based on property features while others are all about relative value ie price in the context of interest rates property rental yield.
Being able to accurately assess a property’s value is one of the most important skills
- property inspection – view the subject property in person to determine those structural and emotional elements
- Comparative properties – use an industry database like pricefinder.com.au or rp-data.com.au or SQM to search for sold properties with like structural characteristics to ensure you’re comparing like to like. Domain and realestate.com.au are also handy tools.
- Opportunity – This is all about potentially adding value to the existing structure and presentation to increase its value.
- Compare properties in surrounding suburbs too as buyers will do this comparison.
- Suburb historic price growth – This information will help you to find price growth of same property type in that suburb. The websites sqmresearch.com.au, pricefinder.com.au or corelogic.com.au store this information.
- Rental yield – The rental yield is the annual rent divided by the property price. Over time the rental yield is typically 4-6% for residential properties. This will vary for property types as well as the location.
- Buyer demand – a good estimate for this is to look at days on market versus other suburbs Vacancy rates in the rental market also provide information here.