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I have no problems with valuers acting as agents. However i have read the quoted case you have supplied and may i suggest that anyone who is going to get in a hissing fit over a 15,000 valuation difference in the modern market needs to have his head read anyway. The figure represents a 5.4% difference over the 260k quoted for the property. If you are going to be purchasing a property of any sort REGARDLESS of the presence of a valuer (of sound or dubious means) and you havent done any of your own research .. CAVEAT EMPTOR (buyer beware) on that.
The usual increase over and above the actual (valuation) of the property can be anything up to 10%. So, on your given example the banks nor the valuers wouldnt have blinked if there was a 5% discrepancy on pricing. A 10% leeway allows for any price up to 286k for the quoted house.
Valuers have organisations they belong to and do most of their business based on trust. If the bank or financial institution needs to query their figures they must be able to supply factual recent sales that backs up the given valuation.
You seem to be thinking there are a whole bunch of organised cartels designed to fleece you of your hard earned dollar. In reality, you have organisations which base their whole existance on making sure they exude trust and fidelity. Real Estate Agents have their state run bodies which they boast about, and valuers do too. There is a reason that people go to the extra BS to invoke these standards. It makes sure that you as the consumer not only have a leg to stand on, but a reliable set of trading organisations for your investment or home.
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.
In my state (VIC) at least .. a valuer needs a separate licence to operate as a valuer. I'm not 100% familiar with the rules in all states.
I will add an extra bit from the article. Having an over-regulated market not only affects the initial purchase .. it devalues the inherant behaviour of the property as an increasing commodity.
In Victoria they passed legislation to stop bushes and trees and fake bidders from being there at auctions. The end result is the auction scene is sterile 70% of the time. There is no incentive for anyone to put their hands up unless they are prepared to make a genuine offer. However there is also no auction market excitement with an unknown value. The buyers have done their book research and have an idea what they are prepared to pay. So the whole idea of them possibly missing out is negated. This really means that unless the market is in an absolute boom, auctions are a total waste now.
We have lots of regulations for property. Abuse of the regulatory process itself leads to corruption and poor behaviour by the legal authorities. I have seen this in many states of the US and i would hate to see that here.
I would much prefer that dumb buyers stop being dumb buyers. Its not too hard.
The typical complaint is actually that bank valuers undervalue properties, so that you need to put more of your own money in as deposit. I was advised by the builder on one of my houses not to go with one lender as their valuer in the area always undervalues, by like $50k on a $350k purchase.
On my last house that I purchased however, the bank didn't do any valuation, they just approved the loan.
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?
What BS BL!
Valuers protect the interests of banks by not exposing them to adverse risk which their shareholders would not like to carry. Valuers work for those who commission the report ie the bank not the purchaser, why should the purchaser benefit from the valuation or the rationale?
A valuer is not a soothsayer – they are reliant upon factual evidence not hearsay.
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.
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.
I'm sure that if you took a million dollar block in Toorak or Vaucluse and stuck it on the market at 200,000 you'd have people lining up around the block to be the first to place a bid on it. The reason that a property is worth a million bucks is that there are enough people prepared to pay that for it. Estate agents dont set that value, Valuers dont reach that value without backup data from previous sales.
By the way, from history .. people being 'fair' and 'reasonable' to each other traditionally results in people being 'poor' and 'hungry' on the basis they are getting their fair share. I would much prefer a generous capitalised system with a decent socialised welfare system, than a 'fair' system.
Governments who make the systems fairer tend to make it worse for just about everybody. In fact .. memories only go back a certain time. It was 'fair' once for rentals in Victoria (1950s). And the result was .. NO INVESTMENT. It doesnt take long for that to happen for people to realise they are digging their own graves.
Bullmarket wrote: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?
Actually .. property is usually much more of a boring investment than people make it out to be. It usually trends along at a sleepy 4% for all the time its not in a boom. And when the boom hits it may do 30-35% (or more) in a year. So you may have in a standard 15 year cycle .. four years where it goes backwards … eight years of doing nearly nothing .. one year of a trending increase and maybe 2 years of boom. That means that most of the time .. you are sitting there on your property watching the clock tick past. Aint that exciting !!!
The other thing that happens is property in a boom races ahead then spends up to 12 years playing catchup. Which means that rents and inflation also play catchup. So all those people burnt in the last crash, they have been sitting there waiting for their property to return to its glory days THEN they'll sell. And sometimes thats a full generation (20 years). Meanwhile .. rents and inflation and incomes are busy upping themselves all the time. So eventually .. property becomes affordable again. And thats when it booms. Just remember if you are prepared to pay a dollar for a property, there is always someone prepared to pay a dollar more just to get it.
Your kids will be ok. When i started my property investigations, i used the term $100 buck property for a rental that was affordable to just about everyone. The same property would now be a $250 buck property. Your kids will be paying the going rate for property at the time. And if its really too expensive, they'll just be somewhere else.
$1m median house price – so what? If you want a $500k median change your expectations. As Xdrew points out, if people did not have the capacity to pay, then they wouldn't – they would make their decision to buy elsewhere, ie freedom of choice.
There are houses on the market in the US in LA for ridiculous sums of money ie hundreds of millions, yet you have the hide to complain about $1m.
If you watch house prices in the regional capitals, prices have peaked and started to go backwards. They will plateau for several years before going forward again. Rents will play catch up until renting seems an expensive option and property prices will be demand driven once again (boom/bust cycle). There is nothing new about it.
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
Hi GuysHere 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?
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?
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
etcEach 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 postIt 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
There are plenty of suburbs in Sydney where the median price exceeds $1m but there are also more where it is less than $400k. You get what you pay for.
I don't think the case study proved anything based on the information provided. The property may have been overvalued, undervalued or just right. It is certainly a false premise to argue the house prices of the comparable sales should be averaged as thus does not take into account the individual characteristics of the properties.
Instead of Big Brother mandating valuations, a purchaser can get their own valuation anyway if they want.
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.
No , the question is ‘to whom does the valuer owe a duty of care’ & that is generally ‘their’ client (the bank) & whether the valuer has consented to the DOC being extended to others who have sought consent to use the valuation for the instructed purpose.
Bullmarket, as per the Australian case that you cite, valuers are professionals and can be held professionally liable for their errors. If you had read the case (or SNM's link) you would realise that it was an error in calculation of gst not an error in a valuation.
With regards to the accuracy of the information received by the LTO – it is only as good as what has been provided to it by the vendor's solicitor. If this information is wrong it is neither the valuer's nor the LTO's error (BTW the information is purchased from an information provider like residex or RP Data, no one just makes up the numbers).
As for the reliability of valuations – you've picked up 7 cases over 3 years, well that's an awful lot of unhappy customers considering there are thousands of valuers around the country performing many different types valuations on a daily basis (mortgage, insurance, development emv, land value for LTO/ratings, water rights, asset valuations for state government bodies, vals for public companies, reversionary interests, estate, land tax assessments, gst calcs, lease value, market rent, vals for special classes of property…..). Two upset clients a year that is a pretty good strike rate.
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