Many moons ago, the long-held wisdom in property circles was the real estate always doubled in value every 7 to 10 years.
This, as some of us have painfully learnt, is no longer accurate.
Some property markets boom, while others bust. Some houses can jump up in value at a rate of knots for years upon years, while others can languish with virtually no growth whatsoever for a decade or more.
When property statistics are reported, it’s important to understand that they refer to averages. For instance, the most recent data* (as at 3 November 2016) points to the following house price growth Australia-wide:
(houses and units)
Year on Year
|Brisbane (inc Gold Coast)||$545,450||4.99|
At the same time that property prices are increasing, are your wages going up at the same level? Not quite. According to the latest data from the Australian Bureau of Statistics, wage growth was just 2% in the private sector and 2.4% public sector in the 12 months to June this year.
Overall, wage growth has averaged around 3.5% annually in Australia between 1998 and 2015, so our potential to grow our income at work – without upskilling and being promoted, that is – is often out of step with property price increases.
This is why it’s a good idea to pay attention to property growth stats. If your desired real estate area surges 10%, it’s going to be harder to afford a home. But if growth is slowing at the same time as your income is increasing, you might be well-positioned to get into the market.
Now, it pays to keep in mind that these figures only represent an estimation of the overall market’s performance over the last 12 months.
For example, they don’t suggest that every property owner in Sydney had the pleasant experience of watching their home or investment property increase in value by over 10% in the last 12 months.
During this period, some specific homes will have soared in value. Their central locations, beautiful kitchens, close access to public transport and other desirable features may have encouraged buyers to part with top dollar to secure the property.
Elsewhere, perhaps in the same suburb – or even in the very same street – a similar property may have achieved a very different sale price. Perhaps it was a rundown home that hadn’t been renovated in many years; perhaps the owners were desperate to sell, and accepted a steeply discounted offer.
There are many different drivers when it comes to property sales and it’s those influences that property data can’t reflect.
That said, year-on-year property sales data can be very useful. So how can you use it to help get a gauge your property’s value?
Refer to it as an estimate
These types of broad market statistics can give you a solid understanding of how the market is operating as a whole. When you read that the Sydney property market has grown 10% in 12 months, or the Darwin market has declined 4% across the same period, take that information on board as an overall guide as to how the market is moving – but don’t rely on those figures as gospel.
Consider your property compared to the market
Think of where your property sits in the market. Is it a desirable property type in a sought-after suburb, in great condition and if it’s on the rental market, is there a steady supply of tenants lining up to rent it? If so, then there’s a good chance your property sits towards the upper end of the growth spectrum. If however your home needs some TLC, is located on a main street and has no public transport nearby, then it may not attract the same level as demand.
Use a real estate agent to confirm your estimate
If you’re keen to get a more accurate understanding of where your property sits on the current market, consider speaking to a local, experienced real estate agent for a market appraisal. They will take into consideration what the data says, but they will also consider the market conditions within the neighbourhood (down to a street-level), giving you a realistic estimation of your property’s present worth.