Property Valuation and the Structure of Urban Housing Markets - Essay Example

Discuss the process you took for finding and inspecting each property. Property 915/233 COLLINS STREET Melbourne The process of finding this property started with an internet search on the top real estate agents that sell property in Melbourne. Most of the agents keep data describing the property they are selling as well as those they have sold recently. This particular property was found on the website of realestate.com.au, a top property site in Australia. This property was selected from a list of others that had been sold by the company recently because it was classified under ‘units’, and its sale value and sale date was readily available. Having selected the property, its physical location was traced through the Google map, which was printed and used to help physically pay a visit on the property. The inspection process largely depended on the information provided by the real estate agency on its website. The key inspection criteria included general features, type of the property, number of bedrooms, building materials, physical location and building size among other features. Having used the map to trace the property’s physical location, I took its photo and used for further inspection. Property # 2: 1211/339 SWANSTON STREET Melbourne This property was first found by research from the internet on the list of properties that have been sold in Melbourne recently. A lot of information regarding this property was found in several sites including those owned by real estate agents. The process of inspection involved checking of the basement, heating system, air-conditioning, plumbing, roof and electrical system among other aspects of the property. Other important issues that I assessed included maintenance and fire and safety aspects. For additional examination, I used the location map to visit the property and took a photo. This photo was used to examine the physical features of the property. Through the inspection I found that the house was sold on 10th January 2013 for $298, 500. Property #3: 2/84 Mentone Parade Mentone This property was initially found on the websites of realestate.com.au, whereby the preliminary examination was done. At this state, features such as the number of bedrooms and bathrooms, indoor features, wardrobe features, courtyard, fencing, and evaporative cooling were inspected. Also, the address and the location map were obtained from the website. Next, additional information regarding the factors that could have influenced pricing and salability of the property was obtained from a local agent, and augmented with internet research on factors that influence similar transactions. I finally visited the property’s physical location, took a photo and a used it for further examinations. Description of each property Property #1 This property, which is situated in downtown Collins Street, was sold on 10th January 2013, under a normal sale. It was sold for $365, 000 and estimated to attract approximately $450 per week of rental return. This bright and immaculate two bedroom apartment is spacious and conveniently located in the Downtown Street. It is also located in the market, which makes it very competitive. Its location is on the 9th level and measuring 56sqm. It also has a modern gourmet kitchen complete with Euro Bosch appliances, food preparation area, plenty of cupboard space, black granite bench tops, Bosch oven and 4 cook top gas cooker (Watkins, 1999). The dining and living area is quite spacious, hence giving the property a sense of comfort. The master bedroom is fitted with a comfortable king size bedding. One of the bedrooms is spacious enough to accommodate a double bed. The apartment is also fitted with a large bathroom, which extends from the semi-ensuite and this is enhanced with large built in robes. The entry hall faces towards the east Swanston Street, which gives it a magnificent view of the Collins Street skyscrapers. The unit is perfectly suited for the first home buyers who are seeking for an entry level home and especially those seeking to live close to the center of the city as well as those who are interested in becoming residents of the city and like Collins Street neighborhoods. This makes it one of the most idyllic and convenient locations around the city of Melbourne. The apartment is also perfectly located in an environment abuzz with hanging out joints as well as shopping centers including Southgate Promenade, Close to Southbank, Australia on Collins Shopping Centre, Federation Square, Tiffany’s, Federation Square, Botanical Gardens, Melbourne Arts Centre, Art Gallery and The Athenaeum. All these locations are adjacent to Collins Street where the homebuyer can enjoy exotic cafes and knock off drinks. The size of the apartment is approximately 56.67 m2 (6 squares) and stands on a 64 m2 land. The indoor features also include 1 ensuite, 1 toilet, Dishwater, and intercom. Property # 2 This is a clean and tidy one bedroom unit with magnificently tiled terrace coupled with a wonderful city view. It was sold for $ 298,500 on 10th January 2013, under a normal sale. The official entrance hall shows the way into a fully outfitted kitchen. The living area is very spacious and it is fitted with beautiful double doors that make the way into the terrace, which has wonderfully spacious outdoor settings graced with plants, ornaments and barbeque. The property is strategically located within the city, which is ideal for city dwellers, central city pad, or first home buyers. It is located opposite to the State Library and RMIT, which is close to Melbourne Central. Many facilitates that home buyers look out for are within a walking distance including recreation and leisure as well as shopping facilities. The investors should expect to generate about $23, 400 of rental income, which becomes even more attractive considering the property’s potential capital appreciation. According to the auction results, the property stands on a 45 m2 size of the land while the property itself is measuring 38.00 m2 (4 squares). Additional indoor features include 1 toilet, intercom, broadband internet, and built-in wardrobes; while the outdoor features include gray water System, and Eco friendly features Property # 3 This property is a spacious single story villa, which was sold on 28 June 2012. It has a 2 bedroom plus a study area. It is located in a wide facade lot with a huge court at the front. This gorgeous villa is located across the magnificent Minoan Reserve, which has an attractive playground for children. The property is only a 100 meters from the central shopping center where the residents can enjoy a variety of facilities including restaurants, cafes, shops, supermarkets, and banks. Additionally, a public bus transport and a train station are just nearby making the location even more convenient. Other important facilities that are in the neighborhood include the famous Saint Bede’s College, and Mentone Girls Grammar School, which is very important because the homeowners or their children could wish to study from short distances. This lovely unit also is featured with a spacious layout, two bedrooms, internal laundry, spacious lounge, gorgeous backyard for leisure, and a single garage that can be used as a workshop or improvised for any other purposes. The location is extremely convenient since its neighborhood is abuzz with shops, beach, and community services such as public transport. On analysis of auction information, additional features that were found include 1 bathroom, built-in wardrobes, evaporative cooling, dish water, circumference wall, among other attractive and convenient features. The property was sold for $470, 000 and can attract monthly rentals of about $580 Comparing each of the 3 sale properties to the original property This paper will compare the above 3 properties with a unit property located near the Clayton station, and whose address is “Unit3/ 5 Jeanette Street, Clayton South, VIC 3169”. Its monthly rental is estimated at $ 1716. This property is a three bedroom unit, with a garage, one bathroom, a kitchen and a laundry place. Its floor is made of hardwoods and has an enclosed backyard. The property is also strategically located close to the Clayton Train Station as well as Clayton shopping area. Also, the property is located at the middle of the Monash City Centre. The unit is located about 10 minutes walk to the Clayton Train Station. Comparison with property # 1 Ideally, the location is the most important factor that determines the value of land. This is because the location determines the kind of vicinity a land lies, and the land’s access to essential facilities such as shops, libraries, and parks. Furthermore, a good neighborhoods means that the residents will experience less crime and perhaps enjoy the appreciation of their property. Both lands are situated in different parts of the Melbourne urban area, which makes the cost of both lands quite high as it would be expected. However, the land on which property 1 stands would be superior because it is located in a neighborhood that is more serene and somewhat surrounded with more essential facilities. Although it cannot be ignored that the Clayton property is near a Train station among other important facilities, property 1 is in a more commercialized neighborhood with facilities such as a market and recreation and leisure centers. What this means is that, for a location that is abuzz with commercial activities, the value of land tends to be high because it is sought by many investors who want to invest in that particular place. On the other hand, the house components of property 1 are inferior compared to those of the property of Clayton area. This is because, although both of the properties have kitchen and bathroom, the Clanton unit has an additional bedroom and a garage, both of which constitute a very high value on a house. The rental for property 1 is higher than that of the Clayton property. Generally, property 1 is more valuable, which is largely because it is being located in a very expensive and commercial area. Comparison with property # 2 The land on which property 2 stands is superior to that of the Clayton property. This is because this property is located nearer to the Melbourne central business district than the Clayton land. In addition, as it would be expected, the land is very expensive in the central business district and its vicinity. Furthermore, the commercial activities within Melbourne and its neighborhood coupled with access to limitless numbers of essential facilities means that the land here is quite expensive. Although the land on which Clanton property stands is also within the Melbourne urban area as well as near a train station, the land value in this location is still lower compared to the ones near the Melbourne central. Nevertheless, the value of property 2’s house components is inferior to those of Clayton property because it has less features and it is smaller in size. For example, property one has only one bedroom and it lacks a garage among many other features. In general, property from Clayton area is superior because, despite it being located on a land that is less valuable, it is comparatively large in size and attracts higher rentals per month and its sale value is also perhaps higher (Rothenberg et al. 1991). Comparison with property # 3 Property 3 is located in a very strategic place, which has very many essential facilities including schools, colleges, and public transport among many others. Actually, this location has virtually all the facilities available within the Clayton area only that property 3 is nearer to the Melbourne central district, which makes the value of land here dearer. Nevertheless, the value of the house components of property from the Clayton area is perhaps superior because it is fitted with so many accessories, additional rooms and even a garage and an extra bedroom, which as discussed earlier, increases the value of the property substantially. Furthermore, the properties from Clayton seem to be more sophisticated and fitted with more expensive facilities. Reflective summary Essentially, the whole process of identifying, inspecting, describing and even making a comparison of different properties was very interesting though quite challenging at some point. I must state that I have learnt a lot of lessons from this task, particularly concerning the factors that determine the value of land, the value of houses and the values of properties in general. It was very interesting to note that the value of properties is not only determined by the cost incurred in building the house, but also other factors such as the conditions of the neighborhood under which the land lies including availability of essential facilities such as public transport, nearby educational centers, recreational and leisure facilities, shopping centers, and the state of the security among many other factors (Dodgson and Topham, 1990). Most importantly, I learnt that the value of property depends on the value of the land upon which the property lies as well as the design and the components of the house. It was interesting to note that the properties that are nearer to a city’s central business are highly valued because of the advantages of living adjacent to such an area including access to facilities such as shopping centers. Ideally, I have found that most of the properties that are developed in the neighborhood of Melbourne city are designed to suit the up market considering the sophistication and exquisiteness as well as the prices of the properties that I have inspected. I have realized that most of these properties are fitted with very many accessories and facilities that are meant to attract the up market buyers who can afford to pay a fortune in return for comfort and serene lives that these homes promise. Upon reflecting more on this issue, I came to realize that the development of homes in such areas only suits the up market class because even the cost of the land around this place is very prohibitive because the environment is considered ‘expensive’. Furthermore, the real estate agents that venture in the development of homes around Melbourne city have strong financial bases and can afford to build very expensive homes. As hinted, I did not enjoy the whole assignment as some parts were very difficult to perform. Actually, even finding a home that was sold in the last 12 months and which is within Melbourne area was a daunting task. This is especially because most of the information I got about properties was available in real estate sites, yet most of these companies focus on information on the property that has not yet been sold while many others do not avail most of the crucial information that I was looking for such as the price of the property, the date that the property was sold, the sales value and the rental value among other issues. Comparing the three properties with one of the properties I did in the first assignment was also very difficult. Deciding the property that was of superior or inferior value forced me to consider very many factors, many of which were not quantified; a process that was absolutely difficult. Overall, I enjoyed exploring various descriptions of the properties. This is because I came to learn a lot of components that real estate developers feature in properties to make them attractive to potential buyers. It was also very interesting to learn the kind of marketing strategies the real estate undertakes to sell their properties, including creating a perception that a property is facing skyscrapers and hence the environment is serene, making the property more attractive (Watkins, 1999). References Dodgson, J.S. and Topham, N., 1990. Valuing residential properties with the hedonic method: a comparison with the results of professional valuations. Housing Studies, Vol. 5, pp.209-13. Rothenberg, J., Galster, G., Butler, R. and Pitkin, J., 1991. The Maze of Urban Housing Markets: Theory, Evidence and Policy. University of Chicago Press: Chicago, IL. Watkins, C., 1999. Property valuation and the structure of urban housing markets. Journal of Property Investment & Finance, Vol. 17, No. 2, pp. 157-157. Read More