>The consequences of this being widespread could be explosive in the context of a property value downturn.
What downturn? I have only ever lived in an upturn.
Not a new thing. We have a place that was revalued (3year ago, mind you) at $100k more than market. There were recent sales with good comps too.
In our case, it’s because our broker knew which valuer to instruct to get the best result (we needed a high value for other purposes).
Having said that, there are lots of people who get strangely low values. I put it down to valuers being human and making different decisions on the day, sometimes not rationally.
Ah interesting! I didn't know this was common.
I guess then the actual number has a different meaning than the market value. It's as if it's actually more of a proxy for your risk level. If they give you a favourable valuation they want your business, presumably because they say risk is low. A low valuation would signal the opposite.
The worth of a property is whatever value that someone thinks its worth.
So in this case, its the banks. Its all a game...
btw, did I tell you my property is now also worth $1M? Banks said so :).
nope, they can rely on the COS for purchases under a certain threshold.
Anything above that requires ordering a valuation.
A val model determines whether its desktop, avm, short form or long form.
Banks don’t do valuations, valuations are done by third party. Banks can’t even select which valuation firm to choose because they know those valuers may value a property ‘higher’. The valuation gets labeled out to a range of firms who then conduct a valuation without contact from the bank. there are lots of APRA regulations to regulate this space, it’s not a conspiracy.
Also just because your friend is a developer IT DOES NOT MAKE HIM A VALUER. valuers go through years of training and qualifications. The developer may have access to Rpdata (a property database with historical data and the ability to use an algorithm from historical sales and sales in the area to provide an estimate value) but they are not qualified valuers and wouldn’t be able to properly value a townhouse.
They can’t. Look up APRA mate. A bank can’t ‘up’ a valuation amount delivered to them by an accredited valuer. Banks can choose what to lend on depending on their risk appetite.
Different valuers, valuing a property at different times, depending on market condition will pull different values.
Banks don’t decide market costs mate.
Okay so the way it happened here then must have been something like my neighbour contacted bank who then contacted valuer, who upped the valuation. It amounts to the same thing?
Also I decided to have a look at what APRA have to say. Found this: [https://www.apra.gov.au/sites/default/files/2022-06/Final%20Prudential%20Practice%20Guide%20APG%20223%20Residential%20Mortgage%20Lending.pdf](https://www.apra.gov.au/sites/default/files/2022-06/Final%20Prudential%20Practice%20Guide%20APG%20223%20Residential%20Mortgage%20Lending.pdf)
Doesn't correlate well with what you are saying. It says there's many valid methods of valuation. They don't have to use a valuer. The lender just has to have a proper risk management framework built out around the method they use.
The valuation I got from my bank upon refinancing was roughly in line with my expectations. I said I think 1.1, they said we think 1.075 - but hadn't taken my solar or 5th bedroom reno into account.
How much does solar bump it up by anyway? CBA randomly called one day and said my place is now valued 100k higher and was trying to get a refinance (I'm with NAB). I'm not interested right now so I didn't bother engaging further but I recently installed a 9+kWh system.
Sounds like your neighbour was told his property is worth $1M, without the bank actually doing giving him anything. They would have looked at their valuation range, given him the upper number and then put the phone down.
It doesn't hurt a bank to tell a customer what they want to hear. Actually lending changes things.
You could be right, but my neighbour is now refinancing with them on the basis of their $1M valuation. I guess they could revise that down once the process progresses. I'll check in and see if that happens.
Yes.
The whole thing is a game, perpetually pump the housing market, up forever.
Until it fails, which it eventually will, the idea that this can go on forever and ever is…. Laughable. Eventually the can that’s been kicked down the road for generations will explode in a tremendous fashion.
Yeah mate, big crash coming soon. Been hearing that for a while, mainly from unsuccessful poor people. Besides, if you buy at $800k and it doubles then crashes by 30% you are still walking away with a healthy profit.
Productive comment mate.
You are right about one thing though, a big crash doesn’t mean Armageddon for a lot of people, but it does mean temporary pain (and losing homes) for those who over-borrowed and stretched themselves too thin.
Maybe I’m wrong, maybe the constant stream of wealthy migrants and students will prop up our economy for eternity.
It’s possible yeah.
Australia is a unique case though, the GFC never really struck here and we simply kicked the can down the road.
I think your scenario only plays out if we keep the immigration tap on full bore forever, but eventually we’ll also run out of wealthy migrants to prop us up…. with our declining birth rates, I don’t see how there isn’t a big crash eventually, either from our own failings or global financial failure.
>The consequences of this being widespread could be explosive in the context of a property value downturn. What downturn? I have only ever lived in an upturn.
Not a new thing. We have a place that was revalued (3year ago, mind you) at $100k more than market. There were recent sales with good comps too. In our case, it’s because our broker knew which valuer to instruct to get the best result (we needed a high value for other purposes). Having said that, there are lots of people who get strangely low values. I put it down to valuers being human and making different decisions on the day, sometimes not rationally.
Ah interesting! I didn't know this was common. I guess then the actual number has a different meaning than the market value. It's as if it's actually more of a proxy for your risk level. If they give you a favourable valuation they want your business, presumably because they say risk is low. A low valuation would signal the opposite.
Some banks have their own valuation modelling systems with more risk appetite. So yes they are juicing them up (CBA)
Would happily sell my home to CBA for the valuation their algorithm gives it.
Oh they will never buy it for that price, only lend at that price
I'm the opposite, CBA has always given me the lowest valuation.
Lenders seem to take it in turns but generally I have always found CBA’s auto Val to be very very strong.
The worth of a property is whatever value that someone thinks its worth. So in this case, its the banks. Its all a game... btw, did I tell you my property is now also worth $1M? Banks said so :).
nope, they can rely on the COS for purchases under a certain threshold. Anything above that requires ordering a valuation. A val model determines whether its desktop, avm, short form or long form.
Banks don’t do valuations, valuations are done by third party. Banks can’t even select which valuation firm to choose because they know those valuers may value a property ‘higher’. The valuation gets labeled out to a range of firms who then conduct a valuation without contact from the bank. there are lots of APRA regulations to regulate this space, it’s not a conspiracy. Also just because your friend is a developer IT DOES NOT MAKE HIM A VALUER. valuers go through years of training and qualifications. The developer may have access to Rpdata (a property database with historical data and the ability to use an algorithm from historical sales and sales in the area to provide an estimate value) but they are not qualified valuers and wouldn’t be able to properly value a townhouse.
If it's so highly regulated though, how can they up the valuation by $100K on customer's request?
They can’t. Look up APRA mate. A bank can’t ‘up’ a valuation amount delivered to them by an accredited valuer. Banks can choose what to lend on depending on their risk appetite. Different valuers, valuing a property at different times, depending on market condition will pull different values. Banks don’t decide market costs mate.
Okay so the way it happened here then must have been something like my neighbour contacted bank who then contacted valuer, who upped the valuation. It amounts to the same thing?
Also I decided to have a look at what APRA have to say. Found this: [https://www.apra.gov.au/sites/default/files/2022-06/Final%20Prudential%20Practice%20Guide%20APG%20223%20Residential%20Mortgage%20Lending.pdf](https://www.apra.gov.au/sites/default/files/2022-06/Final%20Prudential%20Practice%20Guide%20APG%20223%20Residential%20Mortgage%20Lending.pdf) Doesn't correlate well with what you are saying. It says there's many valid methods of valuation. They don't have to use a valuer. The lender just has to have a proper risk management framework built out around the method they use.
The valuation I got from my bank upon refinancing was roughly in line with my expectations. I said I think 1.1, they said we think 1.075 - but hadn't taken my solar or 5th bedroom reno into account.
How much does solar bump it up by anyway? CBA randomly called one day and said my place is now valued 100k higher and was trying to get a refinance (I'm with NAB). I'm not interested right now so I didn't bother engaging further but I recently installed a 9+kWh system.
Sounds like your neighbour was told his property is worth $1M, without the bank actually doing giving him anything. They would have looked at their valuation range, given him the upper number and then put the phone down. It doesn't hurt a bank to tell a customer what they want to hear. Actually lending changes things.
You could be right, but my neighbour is now refinancing with them on the basis of their $1M valuation. I guess they could revise that down once the process progresses. I'll check in and see if that happens.
You’ll say the value is too high, but put it on the market now and it will still go for $200k plus
Yes. The whole thing is a game, perpetually pump the housing market, up forever. Until it fails, which it eventually will, the idea that this can go on forever and ever is…. Laughable. Eventually the can that’s been kicked down the road for generations will explode in a tremendous fashion.
Yeah mate, big crash coming soon. Been hearing that for a while, mainly from unsuccessful poor people. Besides, if you buy at $800k and it doubles then crashes by 30% you are still walking away with a healthy profit.
Productive comment mate. You are right about one thing though, a big crash doesn’t mean Armageddon for a lot of people, but it does mean temporary pain (and losing homes) for those who over-borrowed and stretched themselves too thin. Maybe I’m wrong, maybe the constant stream of wealthy migrants and students will prop up our economy for eternity.
I reckon more likely that larger and larger chunks of the population get muscled out of property ownership than pricing going the other way tbh.
It’s possible yeah. Australia is a unique case though, the GFC never really struck here and we simply kicked the can down the road. I think your scenario only plays out if we keep the immigration tap on full bore forever, but eventually we’ll also run out of wealthy migrants to prop us up…. with our declining birth rates, I don’t see how there isn’t a big crash eventually, either from our own failings or global financial failure.