[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 23, 2011 - 3:39 pm

There is in fact legal precedent for property valuers (or "surveyors" as they are called in the UK) being held financially liable at common law where they value a property negligently:

–Smith v Eric S. Bush, and Harris v Wyre Forest District Council [1990] 1 AC 831 where a property valuer engaged by a building society valued a property for a mortgage application was found to owe a duty of care to the prospective purchaser of the house despite the fact that it was the building society who arranged for the valuation and not the purchaser.

– The above case was affirmed by the Court of Appeal in Merrett v Babb [2001] EWCA Civ 214, [2001] QB 1174 where both the valuer and his firm were found liable

– The above UK cases were followed by the Victorian Supreme Court of Appeal in Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 where the valuer was again held liable despite the existence of a 'disclaimer' on the valuation.

Of course nothing in law is ever completely straight forward and every case will turn on its merits but generally speaking you can assume that a property valuer owes a duty of care to a prospective property purchaser such that should they act negligently in preparing the valuation and the purchaser subsequently suffers financial loss the purchaser can recover that loss from the valuer and his firm. This duty would normally exists whether the valuer places a disclaimer on the valuation or not.

The real issue is what constitutes negligence in this area.

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 23, 2011 - 3:38 pm

There is in fact legal precedent for property valuers (or "surveyors" as they are called in the UK) being held financially liable at common law where they value a property negligently:

–Smith v Eric S. Bush, and Harris v Wyre Forest District Council [1990] 1 AC 831 where a property valuer engaged by a building society valued a property for a mortgage application was found to owe a duty of care to the prospective purchaser of the house despite the fact that it was the building society who arranged for the valuation and not the purchaser.

– The above case was affirmed by the Court of Appeal in Merrett v Babb [2001] EWCA Civ 214, [2001] QB 1174 where both the valuer and his firm were found liable

– The above UK cases were followed by the Victorian Supreme Court of Appeal in Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 where the valuer was again held liable despite the existence of a 'disclaimer' on the valuation.

Of course nothing in law is ever completely straight forward and every case will turn on its merits but generally speaking you can assume that a property valuer owes a duty of care to a prospective property purchaser such that should they act negligently in preparing the valuation and the purchaser subsequently suffers financial loss the purchaser can recover that loss from the valuer and his firm. This duty would normally exists whether the valuer places a disclaimer on the valuation or not.

The real issue is what constitutes negligence in this area.

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 23, 2011 - 6:32 am

xdrew wrote:

Bullmarket, the main issue you have seems to be with increased values heading to and over 1M.

There seems to be some crazy idea, (and its not just you) that property CANT possibly be worth a million or more per person. Well, the reality is it can. There is a whole generation that has been brought up on the idea that a million dollars is a lot of money. Well, way back in the 70s when earnings would have been 10k – 40k .. it would have been enormous. Not now.

Hi Andrew thanks for your opinion

The whole notion of long term median price growth, in Australian capital cities being 7% and doubling every 10 years, or if you are a property bull that long term median price growth being 10% and doubling every 7 years,  is a whole lot of CROC! 

Just check out the Sydney market on RP Data here 

• Sydney  – peaked Apr 04 $530K,      Mar 08 at $520K     and     Mar 10 at $590K 

Yes Sydney peaked in April 2004 at $530,000 and the last peak was March 2010 at $590,000. An increase of $60,000 over 6 years.  

What does that tell you?   Approx 10% growth over 6 years, not 10% growth every year..

Would be fair and reasonable to say that the Sydney market has peaked in terms of affordability. The stimulus package pushed things along but stimulus is finished now

Of course there are sub markets within markets ( I assume this is what you are referring to?)

* Sydney – all of Sydney data
* Local Government Areas
* Suburbs
* Areas within suburbs
* Streets within suburbs
* Property with river views
* Property with ocean views
etc

Each submarket will demonstrate different performance over time .

I would say it will be a long time until the median price of property in Australian capital cities is $1 M

It will come down to home owners affordability and average incomes
Couldn't offer an opinion on when this might occur
Just having a bit of fun in previous post

It would be pretty far fetched to think that the Sydney market would sustain 7% growth and double every 10 years?
That in 10 years time the median price for Sydney will be $1M
Dream on……….

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 23, 2011 - 6:09 am

Scott No Mates wrote:

Australian valuation standards are amongst the highest in the world backed up by the most stable system of registration of property titles and guaranteed by the Crown.

Re 'Australian Valuation Standards are the highest in the world'.  Check out the Valuers Board of QLD website below 

Re " most stable system of registration of property titles and guaranteed by the Crown"  State Governments receive all sales data relating to settled property and each state Gov do not guarantee the reliabilty or accuracy of data.  I can provide factual information to demonstrate this for you.  Regarding a National registration of property titles their is nil. Although there is an organisation pushing a business case for this agenda see http://www.nationaleconveyancing.com.au/Privacy 

Check out the Valuers Board of QLD website http://www.valuersboard.qld.gov.au/complaints/

One of the decisions below states the valuer " failed to verify factual data that may affect the valuation and was negligent in your performance as a valuer and contravened a prescribed code of professional conduct. "

Decisions of the QLD Valuers Disciplinary Committee

Decision – File No: C119-4/09 – October 2010 (PDF, 56 kB)*

Decision – File No: C132-3/10 – October 2010 (PDF, 48 kB)*

Decision – File No: C116-3/09 – December 2009 (PDF, 76 kB)*

Decision – File No: C110-8/08 – August 2009 (PDF, 84 kB)*

Decision – File No: C111-9/08 – June 2009 (PDF, 80 kB)*

Decision – File No: C87- 8/07 – March 2008 (PDF, 10 kB)*

Decision – File No: C102-3/08 – December 2008 (PDF, 75 kB)*

Now who said standards are high?

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 23, 2011 - 5:56 am

Hi

Here is some research info

Check out the Valuers Board of QLD website http://www.valuersboard.qld.gov.au/complaints/

One of the decisions below states the valuer " failed to verify factual data that may affect the valuation and was negligent in your performance as a valuer and contravened a prescribed code of professional conduct. "

Decisions of the QLD Valuers Disciplinary Committee

Decision – File No: C119-4/09 – October 2010 (PDF, 56 kB)*

Decision – File No: C132-3/10 – October 2010 (PDF, 48 kB)*

Decision – File No: C116-3/09 – December 2009 (PDF, 76 kB)*

Decision – File No: C110-8/08 – August 2009 (PDF, 84 kB)*

Decision – File No: C111-9/08 – June 2009 (PDF, 80 kB)*

Decision – File No: C87- 8/07 – March 2008 (PDF, 10 kB)*

Decision – File No: C102-3/08 – December 2008 (PDF, 75 kB)*

Just some objective research
Not stating an opinion either way

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 22, 2011 - 12:47 pm

Hi Guys

Here is a report that might assist in understanding property growth in Australia . It is from

Alan Oster Chief Economist NAB Ltd

It is from an Economics Paper, Alan Oster presented at the Uni of WA

What Determines House Prices: What the Australian Data Tells Us page 10

In this section, we attempt to put a little more rigour into an explanation of what drives house prices – or at least what the Australian data points to. In terms of a longer run relationship clearly one would expect that the key drivers of HBA to be important – namely interest rates and household incomes. Beyond that, population growth, on the supply side, could also be expected to be important. Thus, we begin by estimating a long run (co-integrating) log linear equation of the type:

LnHPt = ?0 + ?1 Ln (Pop) t + ?2 Ln (HDY)t + ?3 Ln (i/p)t

Where: HPt equals Australian house prices (as calculated in the previous section – i.e. using REIA state data, weighted by state real estate transfer expenses from the national accounts)7; Popt is Australian population; HDYt is nominal household disposable income; and i/p t is real interest rates using the 90 bill rate deflated by the previous twelve month rate of increase in the trimmed mean CPI. We would expect that ?1 ?2>0 and ?3<0 – that is, house prices move up with further growth in population and income but down in the face of higher real interest rates. Estimating the equation from 1983(1) to 2005(1) produced the following:

LnHPt = -38.69** + 3.80 Ln(Pop)t** + 0.489 Ln (HDY)t** – .108 Ln(i/p)t**

R^2 = .982 ? = .02 **is significant at the 5% level.

Does that help?

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 22, 2011 - 1:49 am

Thanks guys lots of theories here. Good stuff

This article might shed some light on real estate cycles

The great 18 year real estate cycle – where are we know? http://www.australian-real-estate.net.au/investing/2010/11/15/the-great-18-year-real-estate-cycle-where-are-we-know/

The most interesting thing they say is that every 18 years we can expect the culmination of a credit-fueled real estate and ensuing business cycle.  This, of course, doesn’t imply that all recessions are preceded by a real estate cycle. It only says that all real estate cycles have spawned economic downturns.

This knowledge has allowed for some prescient forecasts. The prize in that department goes to Prof. Fred Foldvary who wrote in 1997: “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.”

By Professor Steve H. Hanke  who is a professor of applied economics at the Johns Hopkins University and a senior fellow at the Cato Institute.

Hanke might have some credibility

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 21, 2011 - 5:10 am

xdrew wrote:

There are of course the shonkys in the industry. Without mentioning names, and i think thats best .. there are various people who bring a bad name to the industry. But they are usually brought to bear on their false statements and are dismissed from any organisation that is reputable. And yes, the shonkys employ the corrupt valuer, the corrupt loan broker, and even the corrupt builder or architect to get your money.

Hi Xdrew

No just interested in questioning standards in the finance and valuation industry.  Both industries are not beyond repute and both industries should be challenged. Wouldn't that be a healthy approach in a democratic society?

Re 5% to 10% variance I suppose if a buyer purchased a property for $1,000,000 it would not matter if the fair market value was $950,000 (5%) or $900,000 (10%) it has no implication?  If the buyer is aware of the over valuation through full disclosure of all sales data yes I totally agree "buyer beware"  however if the buyer is not aware and not making well informed decisions is this an issue?

Don't forget the long term average median growth rate for property is 9% and the median price therefore doubles every 10 years. So in Sydney in 10 years time the median price could be $1M. Nah let's be realistic in Sydney in 15 years time the median price could be $1M. 

Or perhaps in the future at some point in time the median price for homes will be $1M for our children or grandchildren.  Is that feasible?

Perhaps a solution could be to legislate that it is mandatory, that all home loans are subject to a fair market bank valuation, for the buyer and borrower.  The valuer can act in the best interest of the buyer and the buyer will receive a high standard valuation report with comprehensive inclusion of all sales data.  Then the buyer can make a well informed decisions based on objective data.   Does that sound fair and reasonable?

So in the near future it could be worthwhile having 'mandatory fair market valuations' for the buyer, for all property purchases?

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 14, 2011 - 11:49 am

Perhaps I could offer another point of view

Having observed the buying frenzy in Perth in 2006 as a buyers advocate, valuers approving just about anything and lenders accepting crazy short term growth it provided me with an insiders point of view.

Occasionally when observing the market and observing other sales e.g. the property we were considering, that was purchased for over market price (by another buyer), we would see a valuer provide a bank valuation under the offer price and save the buyers bacon (not our client). The deal would fall through and the property would come back on the market. This was the exception and not the norm.

So the valuer was the deal breaker. They could make or break the deal.

Often the valuer would ask the buyers agent for the sales data and naturally the buyers agent would provide sales data that supported the sale. Alternatively the valuers would often call the selling agent for the sales data and naturally the sales agent would provide sales data that supported the sale. Why would a buyers agent or sales agent provide sales data for lower priced sales and risk losing the sale? Self interest and self preservation are human nature.

Often the valuer was very busy and it was much quicker to get sales data from the buyers agent or sales agent. As time is money. The valuers were often on a schedule and have to do so many valuations in one day. Time is money when they have to do volume (valuations). The churn and burn process.

Valuers set property market prices, not buyers and sellers!
They make or break the deal

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 14, 2011 - 11:45 am

Hi Guys my point is this:

If there is not an acceptable valuation there is no deal and no sale.
Even in a rising market, flat market or falling market an unacceptable valuation = no sale.
Valuers are the deal breakers, as they have the responsibility and accountability to provide a satisfactory valuation.
A sale subject to finance cannot be approved without a valuation.  No valuation and no deal.
What ever value they approve, that sets the market price for that property.
Therefore Valuers set property market prices, not buyers and sellers!
Think about it…

Oh of course there is further intrigue, in the context that real estate agents act as valuers and vice versa in Australia. 

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 13, 2011 - 12:06 pm

I agree $340K is a big first step and the article does not indicate that they have paid off the house yet
Of course they would need to furnish the house, have 1 or 2 vehicles, electronic goods, holiday budget, living expenses etc etc etc

Just that hubbie working 75 hours per week which equates to
7 days per week – 11.5 hr days  – not sustainable for health and relationship over even short term
6 days per week – 12.5 hr days –  too tired to be romantic and have kids, which might be beneficial?
5 days per week – 15 hr days (6am to 9pm) – why be in a relationship?

Now Mattt is working 75 hours per day on a labourers wage – after tax dollars go to normal living expenses and loans above etc
Chloe is working as a hairdressing apprentice and would earn a low wage. 

A good story however I cannot see that house being paid off quickly

Any mortgage brokers on the forum who could crunch the numbers?

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

January 13, 2011 - 11:50 am

Thanks Scott

I have done some research.

There is no national legislation, no national regulation or licensing requirements, no national code of ethics and no national accreditation standards for valuers?

Legislation, regulation, licensing and codes of ethics are state by state. Some states do not have relevant legislation, regulation, licensing or code of ethics. In these states Valuers may be registered members of the Australian Property Institute (API) http://www.propertyinstitute.com.au/

The Australian Property Institute comprises members who are Valuers, property managers (Real Estate Agents), property educators, property lawyers, professional property advisors (Real Estate Agents), and analysts, bankers, fund managers, and accountants.

So valuers, real estate agents, developers and lenders all under one umbrella!

The API is not regulated by specific legislation and there are only institute penalties if members contravene a code of practice. There is no independant watch dog to regulate these guys.So industry self regulation only, to protect the public and consumers.

This industry is not like other professional industries that have national legislation, national regulation, national standards, national code of ethics etc e.g. see the Australian Health Practioners Regulation Agency http://www.ahpra.gov.au/ and the Medical Board of Australia http://www.medicalboard.gov.au/

Based on my research there are limited or nil legal penalties if valuers get it wrong or seen to act in the best interest of other parties (lenders, developers etc)

I am happy to share my research data with you indicating state by state what legislation, what regulation, what standards and what legal penalties apply to valuers.

At this point in time the Valuer Industry offers all care and no responsibility..

Not alot of protection for the consumer?

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

December 18, 2010 - 5:48 am

Yes only concerned about residential sales data. That is sales that have occured.

After every residential sale the details of that sale including address, sale price and other relevant information is recorded in an electronic database.

Some State Governments provide excellent low cost, easy access online sales data services to the public whilst on the other end of the spectrum other State Governments do not provide residential sales data to the public. 

They only provide sales data direct to real estate agents and valuers, which is a disadvantage to the public, to buyers and to sellers.

Otherwise consumers can purchase sales data from resellers.
 The major players are  Australian Property Monitors (APM), PDS Live, Residex & RP Data . 

They can do what they like with the data

No standards required

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

December 18, 2010 - 5:21 am

Are you kidding Scott

Are private service providers not subject to Australian standards??
They can publish any data they like?
No accountability?

We are not referring to accuracy about pricing for groceries that could range in value from $1 or $20 (which now require clear price labelling for consumers) 

OR  pricing for white goods that could range in value from $50 to $500 (which require warranties or guarantees) 

OR  pricing for financial services (that require strict financial services licenses) 

OR  pricing for large personal items like motor vehicles that could range in value from $10,000 to $50,000 (that require MV warranties, strict licensing for motor vehicle dealers and strong consumer protection laws)

When considering the purchase of a house, the price could range from $300,000 to $500,000.  All consumers should expect to gain access to accurate, reliable and dependable sales data.  To be able to make well informed decisions.  That is fair and reasonable.  

So private commercial companies can publish any rubbish they like and not be subject to Australian legislation?

Mate that makes sense!

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

December 15, 2010 - 11:38 am

There may be some wisdom here from Jeremy Grantham.

See The Australian Online article " Housing market a time bomb, says investment legend ", says investment legend "

THE Australian and British housing markets are the last two bubbles left in the wake of the financial crisis, and it is only a matter of time before they crash, warns legendary US investor and co-founder of global investment management firm GMO, Jeremy Grantham.

"The price of housing typically trades about 3.5 times of family income and in bubble it goes to 6 or . . . 7.5 (times).
"Australia is having one now. You are at near 7.5 times family income . . . which suggests you are twice the size that you should be."

"Sooner or later, the rates will go up and the game is over."

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

December 15, 2010 - 11:07 am

Perhaps there are some cautionary notes in this article from The Australian Online

Treasury warning on home price 'bubble'

A Senior Treasury member has warned that the prospect of a sudden and dramatic drop in prices is "the elephant in the room" and should not be ignored by the federal government.

cheers

John

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

July 19, 2010 - 2:13 pm

This graphical information describing Alt A and ARMS mortgage resets in 2011 and 2012 might inform

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

March 15, 2010 - 3:17 pm

Hi

I have an idea about selecting a LGA or suburb and analysing it?

check out the Real Estate Investar report below

– Australia's Cheapest Suburbs – Top 50 Suburbs

What could be interesting is to select a location from the list and conduct a location analysis
Are you interested?

These locations could be future hot spots?
Are you interested to find out if they stack up?

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

March 15, 2010 - 2:43 pm

Hi Ryan

Thanks

One forum I posted on did not allow any links and so I simply did not post comments

So I take a polite approach to using links and ask permission first. If it is okay as per your comment I will use links when relevant. 

Sometimes I find forum conversation is twoing and frowing of personal opinions. Can be lively, entertaining and great spectator sport..Which is great fun.  At other times I have observed some research and data in comments and I thought wow what an interesting point of view or what great data.

I do not take a moderate approach, or the approach that the market is stagnant, or a bullish approach that the market is going up and booming or a bearish approach, watch out the bust is coming . 

I prefer to take a broad approach and form an opinion after  consulting and conducting research.

cheers

[BullmarketParticipant@bullmarketJoin Date: 2007Post Count: 51]

March 14, 2010 - 6:12 am

Hi  S Hales

Re physical inspection of the suburb, street and property is important. However  I would conduct alot of due diligence and research before I inspected the property

see Due dilgence
At a minimum check out the sewer position, any road changes planned eg widening or bus stop outside front door etc and some other critical info before I inspected the property

Some of this research can be conducted online using digital imaging software. Check out the lot shape, size, dimensions etc  see