Many Australians are buying and developing properties overseas, particularly in the United States. Discover one key to their success.
There’s been a lot of Australian property investors and developers going places—literally. This is because of their desire to expand their property portfolio.
But why are they expanding to the US?
It’s because the US offers a broader range of property investing and development opportunities with its vast expanse. Investors and developers can take their picks from the East Coast to the West. In Australia, meanwhile, they have limited options due to the smaller land mass.
What remains constant is ensuring accurate property market valuations before investing in or developing a property.
Learn how to do just that with this article. It covers how to calculate the values of properties in both Australia and the US.
Market Value vs. Appraised Value
The terms market value and appraised value are sometimes used interchangeably. But they are distinct concepts.
Market value is a dynamic number.
It reflects the current worth of a property based on existing market conditions. Factors like recent sales of similar properties, the overall health of the economy, local demand and supply, and future market predictions can influence this value.
For investors and sellers, the market value offers a snapshot of how much a property might be sold for at the present.
The appraised value of a property is more static.
It’s determined by a professional appraiser who assesses a property’s characteristics and condition. Then, they compare it with that of similar properties that have recently sold.
The appraised value of a property is a valuation that provides an objective and detailed insight. But it’s rooted at a particular moment in time and may not always keep pace with fluid market changes.
Now, why is the distinction between market value and appraised value important?
Simply put, understanding both values can aid you in negotiating prices, securing financing, and making informed choices in various property markets.
Archistar’s partnership with Domain and CoreLogic, and its features that integrate their data, ensure that property developers and investors have access to comprehensive and accurate information on market trends and recent property sales.
This way, they’ll have a better understanding of a property’s market value, not to mention get real-time insights into prevailing market conditions.
Market Valuation in Australia
With Australia’s urban hubs and tranquil regions, each area presents unique valuation challenges and opportunities. Here’s how you can ensure accurate property valuation in Australia:
Step #1. Check Local Market Conditions
The economic health of a specific area encompasses factors such as employment rates, business growth, and consumer confidence. And it has a notable influence on property values. This is why a metropolis like Sydney naturally has different valuation parameters compared to more serene regions like Tasmania.
Another critical aspect to look into is the supply-and-demand balance. An oversupply of properties in an area can push values down. Meanwhile, areas with high demand for property can witness surging prices.
Local events and developments, be it infrastructure projects, changes in local governance, or other significant events, can also have a marked impact on property values. For instance, new transportation links can elevate the value of properties in areas that were previously less accessible.
Step #2. Choose the Market Valuation Method
In the Australian property market, there are 3 market valuation methods commonly used:
- Comparable Sales Method – You compare the recent sales of similar properties within a locality to get a relative market value for a particular property.
- Income Method – Mainly relevant for investment properties, this method assesses a property’s worth based on the potential income it can generate. It focuses on the property’s earning power, particularly on the potential return on investment (ROI).
- Cost Method – Here, the emphasis is on the cost of constructing a replica of a property. Land value combined with the cost of current construction, less any depreciation, can provide you with a tangible figure.
Step #3. Seek Guidance from a Valuer
Engaging with a valuer not only ensures accuracy but also gives you confidence in your property-related decisions. Their expertise can highlight potential opportunities or risks that might be overlooked without a professional assessment.
Market Valuation in the United States
As mentioned, the US property market has a wider scope than the Australian market. But it still requires careful valuation, which is typically done this way:
Step #1. Understand the Capitalisation Rate
Central to any property’s investment potential in the US is the Capitalisation Rate.
Also known as the “Cap Rate,” this metric evaluates the property’s potential return on investment or profitability. It’s calculated by dividing the property’s net operating income by its current market value.
Step #2. Consider Alternative Valuation Methods
The ideal methods for the US market include:
- Replacement Cost Method – Similar to the Cost Method, this method doesn’t focus on sale comparisons. Rather, it evaluates how much it would cost to replace a property today. By considering land value and current construction costs minus depreciation, you get a tangible measure of worth.
- After Repair Value (ARV) – This is particularly for those eyeing distressed properties or fixer-uppers. The ARV estimates a property’s value post-renovation.
Step #3. Do a Historical Analysis
Before you can look forward to the gains of your property development or investment, it’s essential to look back.
You have to assess a property’s historical price movements and broader market trends. It’s how you can glean insights and patterns that’ll provide you with context to today’s valuation.
Step #4. Use Online Valuation Tools
To make the whole process even easier, consider using online valuation tools.
There are platforms, often relying on AI, that aggregate vast swathes of data. And they can give you instantaneous, albeit preliminary, property valuations.
Step #5. Hire a Professional Appraiser
For a nuanced, in-depth assessment for determining a property’s value, the expertise of a licensed appraiser is unmatched. After all, they are grounded in experience and backed by rigorous training.
This means their insights offer you clarity amidst the market’s ebb and flow. Not to mention they consider other factors that online platforms can’t.
Harness the Power of Trusted Data with Archistar’s Partners
No matter which property market you choose to invest or develop, having access to timely and reliable data is crucial.
Archistar has acknowledged this need.
As such, it has forged strong alliances with renowned industry giants such as Domain and CoreLogic. These partnerships ensure the delivery of precise, up-to-the-minute market value data and provide users with a more holistic view of the market trends, allowing for well-informed decision-making and strategies.
With Archistar, you not only receive top-tier information but also benefit from the expertise and advanced tools that come with these partnerships.
Try out Archistar for free today to experience how beneficial the platform is to those seeking to optimise their property analysis in various property markets.