This month, we sat down with Ian Angelico, Managing Director at CVA, to get his thoughts on how to value property in today’s ever-changing commercial market.
In the current market valuations are likely to fluctuate more than usual. The good news is that there are still profits to be made in Melbourne, provided you get the price right.
With the recent emergence of technology and online platforms, questions have been raised about the necessity of a consultant or agent to help value property. While it’s true that residential properties can be successfully bought, sold and rented online, for commercial properties, having an expert’s opinion is crucial.
An agent or consultant brings invaluable experience, as well as local knowledge, to evaluate a property in addition to weighing up the tell-tale signs of progress and position, including proximity to public transport and new infrastructure in the area. At CVA, we utilise our 20 years of Melbourne-based experience to help clients achieve the right price.
This includes taking into account market trends, the type of building, how much maintenance is involved and the local area (for example, future re-zoning). Intangible factors also affect the valuation; currently investors are only receiving 2% interest from bank deposits which is affecting sales.
When calculating a property's value for our clients, at CVA we take the time to apply at least two methods to provide a “check and balance” before finalising our opinion of value. This is a type of “risk assessment” and will comprise of two of the following three methods:
1. Direct comparison: an assessment of the land or building sale, and or rental rates, of similar properties in comparable locations. This includes in-depth research of the area, as comparisons are most likely to show what is happening in the local market and what people are looking for.
2. Capitalisation: a calculation of projected future rental income. Rental and yields are also determined by comparable transactions.
3. Summation: a determination of current land values, as well as consideration of the replacement value of any improvements.
Alongside our commercial property experience and knowledge, we also rely on good old fashioned ‘gut instinct’. This is an intuitive feeling only amassed after years of being in the real estate business and experiencing the good, the bad and the ugly. While you can never entirely predict the state of the market, building on experience and using past situations to make educated decisions is invaluable.
A good real estate agent, commercial or residential, will always have their finger on the pulse of current trends. That’s how we’re able to add value and streamline the process for our clients, helping them achieve the right price.