What are the challenges to consistently delivering accurate valuations in the current market?
The key is access to trails of information. In a heavily traded market you can see the trends. Nevertheless, if you know there’s a decline but you don’t really have a sense of its extent then it’s very challenging. Lenders are looking for as much comfort as they can get. It comes down to exercising our judgment.
How realistic are most buyers’ expectations when it comes to valuations/
In a rising market buyers’ expectations are normally satisfied. I’d be confident in saying that in almost 100 per cent of cases [they’re satisfied] because in a rising market unless there’s something really wrong the contract price should be covered.
A falling market is a different matter. If we know the trend is down the evidence is on the slippery side. Valuers take that into account and they look at what the risks are. It’s very challenging, particularly in a thinly coated market: i.e. when there isn’t a great deal of evidence. In some of those high-end commercial markets there’s just no evidence at the moment.
How has technology changed the valuation process over the last year or so and what changes lie ahead?
Gone are the days of going out with a pen and a tape measure; we now have tablets – bigger versions of a handheld – that’s our newest technology. It allows for the input of data and sales information as well as the validation for that data. We’ve built in some checks to ensure our valuers get it right the first time, every time. I would say our technology is at the front end of the market.
We can turn [valuations] around within 24-48 hours and are aiming to do it in significantly less time in the coming year. This compares to around three days several years ago before the [introduction of this] technology. And we can link straight back to the banks.
What are your expectations for property values over the coming 12 months?
The most immediate pressure point will be the first home owner space. If the increased grant doesn’t continue there are different views about what might happen, but property values might fall off a cliff – depending on what is happening on a macro environment at the same time.
You’ve got the lower end – let’s call it the sub $500,000 market – and the upper end of the market; then there is a dead space in that middle tier. If people sell to a first home buyer and upgrade you’ll see movement in that [middle] tier however a lot of that is dependent on unemployment. You’ve got interest rates that are very low but if people don’t think they’ll keep their jobs in the medium- or longer-term they’re not going to borrow.
First home buyers are taking advantage of the grant, low interest rates and the fact house prices have dropped, and what that does is underpin prices in the lower bracket and increases activity. Right now our offices are busy; our Sydney office is even employing more people.
In Queensland and other parts of the country there is still population growth and of course people have to live somewhere. But what’s holding the market back is concern about unemployment – people won’t put their hands in their pockets unless they’re confident about their job. The big unknown is how the next quarter will play out. Indications at the moment are that the US may pick up next year... so does that mean that will fly through to Australia? Or is the wash through from the US still coming?