Pricing Property: What Makes Values Increase or Decrease?

Janet Fleet
October 20, 2017

PARTNER, AUCTIONEER, LICENSED ESTATE AGENT

You’re ready to take the next step on the property ladder, but how do you know your timing is right?

Understanding these influences on the real estate market means you’ll be in a much better position to predict which prices are about to move.

Supply: How many properties are on the market?

Property supply is one of the biggest influences on property prices across Australia. If there are too many houses available in a particular area, buyers know they have more bargaining power, while sellers are obliged to negotiate a lower price.

Along with the location of the property, supply also depends on property type. At the moment there signs of an oversupply of apartments in areas of Brisbane and Melbourne, for example, but even if this drives down apartment prices it won’t affect detached homes. 

Interest rates: How expensive are mortgages?

Interest rates get the most attention when it comes to real estate news and they are an important part of the mix. Higher interest rates mean more expensive mortgages over the long term, which can deter buyers who have to be more conservative. Similarly, lower interest rates can encourage more buyer activity. 

But there are other financial bonuses that can have an even bigger impact on certain segments of the market. For example, Victoria’s new stamp duty concessions for first-time buyers could push house prices higher as more people are able to afford their first home.

Buyer competition: How many people want the property?

The more auctions you attend, the more you start to see how closely sold prices are linked to auction attendance. An attractive property in a desirable market should fetch a high sale price, but if the agent hasn’t marketed the property well or the sale is poorly timed, that sale price could be far less than the seller hoped for. The presence of developers at an auction can also have a big impact on competition, as these buyers will tend to have much higher bidding capacity.

Demographics: Who wants to live in this area?

Another reason property prices across Melbourne have steadily increased over the past decade is the influx of new residents – nearly 1,900 people every seven days since 2011, according to the 2016 census. The census also suggested a large percentage of ‘Gen Y’ residents who now call Melbourne home, which could mean areas popular with younger buyers see an uptick in house prices. 

Remember: Multiple factors influence each market

When it comes to your property market it’s more than likely that a combination of factors are in play. For example, recent CoreLogic data suggest properties in Melbourne’s east and southeast suburbs are selling more quickly than anywhere else in the city, but this isn’t due to any single factor.

Finally, it’s important to look at market influences at the suburb or even street level. A planned new school or change to school catchment area could mean a suburb is suddenly much more valuable to families, while a high-rise development that impacts an established streetscape could have a negative impact on prices for nearby detached homes.

Talk to our team today about what the market is doing in the area you’re looking at. 

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