What is Depreciation and How Can it Affect Property Valuations?

Depreciation is a major concern for residential, commercial, and industrial property owners. When property valuations Perth determine that the value of a property has dropped, it can have a large impact. property-valuation-1014x487For those that invest in real estate and rent locations out for either residential or commercial use, depreciation can force them to lower the rent and limit their profits. For homeowners looking to sell their home, this can affect their asking price.

 

 

Understanding Depreciation

What is depreciation? Depreciation is the natural decline in value of an item, in this case real estate, over time. When considering depreciation, you must realize that the structure of a property will depreciate while the land may actually appreciate in value. Overall, if the economy is strong, you should not notice any real depreciation in value of your residential property, but if you are selling or buying properties, or looking to rent or rent out a property, you need to pay attention to the subtle signs that depreciation could occur.

Supply and Demand

One of the biggest factors that leads to depreciation of a property is supply and demand. As demand increases, the property valuations Perth result in higher prices for real estate. When demand decreases, real estate becomes a buyer’s market and the prices tend to decline. Before scheduling property valuations Perth, pay attention to the supply and demand of real estate in your area. Contact a real estate agent if you need help learning more about the current market.

Property-Value-increaseDemand is counterbalanced by supply. Even when demand is down, you may not always find a buyer’s market if their is a limited supply. For example, if your commercial property is the only available commercial lot in the area, low demand for commercial properties may not have a large impact on your property valuations Perth.

Damaged and Neglected Properties

Obviously a property that has suffered from neglect or damages will see some depreciation compared to the last time property valuations Perth were performed. This can be a positive factor for potential home buyers and real estate investors. When having Perth property valuers inspect a property, make sure that the the condition of the structure of the property is factored into the final value. Minor damages and neglect can often be easily repaired, bringing the property value back to a normal level for the area. At the same time, if you are attempting to sell a property, it may be worth your time to take care of any needed repairs or maintenance before having your property valued by professionals. Depending on the extent of the damages, you may be able to recoup the amount you invest in repairs or even see a greater return on investment when updating a property.

Depreciation Rates Vary

The actual rate at which a property may depreciate in value will vary from area to area and from time to time. Follow changes in the real estate market and look for the best times to get property valuations Perth of a property before selling or buying a residential, commercial, or industrial location.

The bottom line is that depreciation is not a constant. It can change quickly based on a large variety of factors. Understanding depreciation will help you out, whether you are buying or selling properties. Learn more about the current supply and demand in your area, consider damages and neglect to a particular property when deciding if a property valuation was fair, and realize that depreciation rates will vary over time.

Thank you for reading, if you have any questions about property valuations Perth, depreciation of properties, or any other comments related to this information, please leave a message below or contact us directly.

5 Tips for Ensuring You Get a Fair Property Valuation

Whether you are thinking about selling your property or need to have your property evaluated for tax purposes, you need to ensure you are getting a proper evaluation of your home. There are a lot of different considerations that factor into the market value of a home at any given time. Professional Perth property valuers will look into the conditions of the market, the location of the property, the condition of the home, and other factors. Before you purchase a new home, take a look at these 5 tips for getting a fair property valuation.

pig5 – Consider the Current Market Conditions

The first thing to consider is the current market conditions. Find out if prices have been gradually increasing or decreasing in the area. When you are dealing with a buyer’s market, the property valuations WA tend to be low and when it is a seller’s market, the prices tend to rise. That is the generalization; though, if the market has not yet reached its peak, the reverse can be true.

It can be hard to notice these peaks, so find out what your local Perth property valuers have to say about the conditions of the current market as you explore real estate in Western Australia. If you are having your own property valuated, pay attention to the changes in the market and consider waiting if conditions are unfavorable.

4 – For Sale by Owner Properties

When you are considering purchasing a home that is being sold directly through the owner of the property and not a real estate agency, you should understand that the seller is not getting charged a seller’s agent commission. This should result in a lower price for the home.

If you are looking at a property being sold by the owner, find out what the actual fair market value of the property is and do ensure you are not getting overcharged. For those selling their own property, you need to provide a fair price for your property and not attempt to include the standard seller’s commission.

3 – Learn More About Appreciation

Before getting a property valuation Perth, learn more about appreciation in your area. Learn more about the potential developments in the neighborhood, such as the building a of a new school, the opening of a Portugal-property-valuationmall or large commercial development. Changes in the area will directly impact the appreciation of homes in the neighborhood.

When the outlook is good, you can expect increases in property valuations in the area in the future. Use this information to your advantage and plan accordingly when selling or buying a home. If you are selling your home, you may want to wait until you start seeing the values of properties appreciate; though, if you are buying home, you may want to hurry to get ahead of the curve.

2 – Talk to a Real Estate Agent

Real estate agents constantly follow trends in the market and developments in the areas where they deal with real estate. They can be a great source of additional information and suggestions before contacting a Perth property valuer to evaluate your property or a home that you are considering purchasing. It is a real estate agent’s job to follow and monitor changes in the market along with the appreciation and depreciation of properties in the area. Always seek out their advice, whether you are buying or selling.

1 – Consider What Feels Fair to You

Our final tip for ensuring you get an accurate and fair valuation of a property is to consider whether the price feels fair to you. When a realtor recommends a starting price, be honest with yourself about whether you think that is a fair price for your home. When you are searching for a home, learn more about the area and the prices similar homes have sold for.

Combine all 5 of these tips when you are thinking about buying or selling a property. When the time comes to schedule property valuations WA, you will have a better idea of what to expect. For further information on property valuations, look over some of our other blog articles or send us a message.

The Top 4 Factors in Valuing a Property

If you are considering purchasing a home, especially if it is your first home, you should take a moment to learn more about what goes into house valuations Perth. Many first-time buyers place a focus on the style of the home, which is fine, as long as you also consider some of the factors used by property valuers Perth. By understanding the top 4 factors in valuing a Western Australian property, you can gain better insight into whether a property is really the right home for you and your family.

The Physical Structure

The first thing that will be examined during WA valuations is the physical structure of the property. This is what most potential homeowners will be examining and it is only a fraction of the consideration that goes into the final market value of a property during WA valuations. One of the reasons that the physical structure of a home is not the most determining factor is that the structure itself will depreciate over time. While certain home improvements and increase the value moderately, the following three factors play an even bigger role in the changing value of a real estate property.

The Actual Land

land_valuationLand will normally appreciate in value over time. This is due to the simple fact that land is limited in supply and over time demand will typically increase; though, the actual demand will vary from year to year based on a number of different economical factors. When demand for properties in a particular area increases, the properties in that area may see an increase in overall value. For example, when families begin flocking to a specific residential area the overall price of homes in that area begin to increase. So basically, when Perth property valuers begin assessing a property, they will look at the number of homes recently sold in the area, the number of people seeking home in the area, and the average prices of these properties.

The Location of the Property

The location of the property greatly affects the value of the land. As mentioned above, when demand is high in one particular location, the property values increase. Learn more about the school system in the area, the current job market, and any other developments that may affect the number of people seeking new homes in the area. If you are rental property investor, you may want to look at locations where demand is low and seek a better return on your investment.

The Current Market

need-a-valuationThe current market fluctuates as the economy fluctuates. As unemployment rates increase, fewer people seek new homes and there is often an increase in foreclosures and people looking to sell their properties. This can lead to a skew in supply and demand and drop in property values in that area. Perth property valuers look into the current market to see what changes have occurred in the real estate market over the past year.

By combining each of these factors, WA valuations tend to be a more accurate indication of the actual current value of a property. You can rely on just the aesthetics of a property when shopping around for a new home, you must also consider these other factors as they will have a large impact on what you can reasonably expect a property to sell for. Before jumping in and choosing a home, think about the location of the property, whether it is a buyer’s or seller’s market, the current economy, and finally the property itself.

If you want further advice on WA valuations, take a look at any our other articles or leave us a comment.

Learn the Top 4 Methods of Valuing a Rental Property

Investing in real estate can be a profitable venture, if you are smart about the properties you purchase and pay attention to the changes in the real estate market. For those in Western Australia, it will help to understand the main methods used by Perth property valuers to determine the current value of a property. Before you begin searching the market for suitable real estate properties to set up as a rental, learn more about the top 4 methods of valuing a rental property.

The Sales Comparison Approach

Home-ValuesThe sales comparison approach is one of the most used methods of valuing a property and used in most residential real estate valuations. The basics of the sales comparison approach involve comparing the recent sale of similar homes over the past year. The homes that are compared must be in the same general region and fall into the same price bracket.

For an entrepreneur that is interested in using real estate for rental purposes, you will want to use the sales comparison approach of an extended period of time, possibly going back more than a year, to see if there are any emerging trends in the real estate market. Use the sales comparison approach to compare the rental prices of similar properties in the area.

Capital Asset Pricing Model

The capital asset pricing model is a more detailed method used by Perth property valuers and rental property owners. With capital asset pricing models, we are looking at the basics of risk and opportunity and how they apply to real estate investing. Essentially, you are attempting to determine if a particular property will provide a high return on investment when compared to investments that carry no risk, such as the purchase of bonds.

The thought process behind this is that if the ROI of a potential rental property is not higher than the ROI on a risk-free investment, then the property is not worth the effort. Some of the factors that are considered to determine risks when using this approach include the age of the property, how much maintenance or upkeep will be needed, and the location of the property.

The Income Approach

The income approach is fairly straight-forward when it comes to house valuations Perth. The general concept is to determine the potential income that a rental property may be able to yield compared the initial investment. Perth property valuers using the income approach will look at the average monthly rental prices of similar buildings or homes in the area.

The Cost Approach

The final method for determining if a rental property will be a sound investment is the cost approach. Many Perth property valuers will use this method for valuing vacant land. The basic idea is to take the house-price-increaseactual value of the land and then the depreciated value of the building or property and any improvements and adding it all together.

This method is used to determine if constructing a building or housing unit on the land will be the best use of the vacant area. Property valuers will look into what developments are in the area, such as whether it is mostly an industrial, commercial, or residential region. They will also look at the property zoning, to ensure the land is suitable for the type of development that investor has in mind.

In the end, real estate investing can be tricky, and you really have to consider the help of a professional property valuer in your area that is familiar with the current real estate market. Many smart investors will rely on a combination of house valuation Perth methods to arrive at a decision as to whether the property they are considering will be a good investment. If you want further information on house valuations Perth, please contact us today for more info.

Understanding the Basics of Property Valuations Perth

Depositphotos_2285300_s-550x401There are many different reasons for needing to contact Perth property valuers to get an accurate evaluation of a property. This can include real estate financing when considering the purchase of a property, listing a property for sale, property insurance, and even for the proper taxation of the location.

While most residential, commercial, and industrial property owners understand that the value of a property can shift over time, it can be difficult to truly understand what goes into property valuations Perth. Below, we will cover some of the basic concepts that Perth property valuers use when evaluating a property.

An Overview of Fair Market Value

Obviously, the main purpose of a property valuation is to determine the overall value of the property. This is the current worth of the real estate property and a number of factors are used to accurately give an estimate. The four main elements of determining a value are demand, utility, scarcity, and transferability. These same four elements are used for the arriving at an agreeable price for the majority of products, items, and services that you may purchase.

home_valueDemand can be categorized as the overall need of consumers wanting to purchase a particular item – such as real estate. Utility refers to the markets ability to satisfy the demand. Scarcity describes the overall availability of an item. Finally, transferability is how easily an item can be transferred from the previous owner to the interested party.

The market value of a property is determined during a property valuation, as performed by Perth property valuers. This may not necessarily be the exact value of a property, but is rather an estimate of the value that is arrived at by considering the four elements discussed above. Perth property valuers will look at the demand for real estate in the same area, how many similar properties are currently on the market, and any extenuating circumstances that could prevent the property from easily being listed for sale or transferred to an owner.

Other extenuating circumstances may force the current owner to require a fast sale of the property, such as when going through foreclosure. The market value can be thought of as an accurate assumption of what you could expect to get for your property if you were to sell it in the current condition of the real estate market.

Property Valuation Methods

An accurate property valuation Perth will vary based on which method the valuers used to collect the data needed to arrive at a value. They will be looking at the actual condition of the property, the previously assessed value, and the conditions described above. There are three main methods that are used by Perth property valuers to provide an accurate appraisal of a property. These three methods include the sales comparison approach, the cost approach, and income capitalization approach. The sales comparison approach involves comparing the recent sale of similar properties in the same area.

The properties that are compared will be similar in size, in location, and sold in the past year. The cost approach is often reserved for valuing properties that are not commonly on the market, such as churches are government buildings. With the cost approach, the valuer is determining the value of the building and the land separately and adding the two together. Using the income capitalization approach, a valuer can offer a better determination of a fair market value for an income producing property.

That covers the most basic fundamentals of property valuations in Perth. If you live or own a property in Western Australia and want to learn more about property valuations, then contact us at ETM Valuers today.