Thursday, October 29, 2015

Update on House Value

Another house in our development recently sold at auction. The price has just gone online. It sold for $A850k. The original sale price when new was $A735k. Our house originally sold for $A650k. Using the same percentage increase our house would be worth $A752k. We paid $A740k. But I have been valuing it at $A785k based on the valuation we got prior to buying. Not sure if I should lower the carrying value to $A750k?


Bigchrisb said...

Residential property is notoriously difficult to value - the only time you really know the price is when you have a contract for sale!

If it's in the same complex I'd suggest that it is as good a market value as you will get, and adjusting your holding value would make sense. Pro-rating based on the initial sales price is as good a methodology as any. said...

It's probably a good 'guestimate' as to the current market value for your house, but if you want to calculate an approximate value each month I'd simply look up the average sales price data for your postcode (figures are published each month eg. ) and calculate the initial ratio of your purchase price to the suburb average, and then use that to calculate an estimated house valuation each month based on price movements in your suburb.

The postcode average sales price data tends to be a bit 'laggy' though, as they publish 12 or 6 month moving average (which does help 'smooth' the data a bit, as it can get skewed if there are several expensive or cheap houses sold in your suburb in a particular month).

Alternatively you can use the RPdata monthly index for your city (, which is a better measure of the overall market (and is up-to-date), but it doesn't reflect the situation in your particular suburb.

Whatever method you pick is only ever going to be a rough guide, but I still like having a monthly figure to plug into my NW calculation rather than simply leave it at 'cost' or do an infrequent ad hoc price up date.

How close any estimate is to 'reality' will never be known, as the only prices that matter are the one you paid, and the one you actually get if and when you sell it. There is also the assumption that you actually paid 'fair market value' when you bought it, and that you'll get market value when you sell it.

Just pick a method and stick to it. I found that the 'suburb average sales price' was difficult to use in practice, as these 'free' services come and go, and each one has a slightly different way of calculating the figure. The RP data is more likely to be available over the long-term and use a consistent method, so that might be the way to go. You could even set up some web scraping software to automatically get the daily index value ;)

mOOm said...

Thanks to both of you for your comments! I looked at the realestate site and it shows a really steep increase in prices for houses in my suburb this year:

I think there just must have been a change in the types of properties sold over this period. I think I will stick to the conservative approach of occasional updating based on very similar sales in the immediate neighborhood. I lowered the value to $750k.

Financial Independence said...

I agree, that the house is only worth is how much the other person is ready to pay for it.
What is quite controversial for me is that people are quite obsessed with value of their only property. yet they are continuously making a lot of irrational decision by putting money in the house, which does not change its value.

If you are living in the property, which your bought for yourself and planning to retire in it or live long term, the price of the house is of no of big importance. Please correct me if I am missing something here.

mOOm said...

I strongly doubt that we will retire in this house.