This podcast explains whether you can rely on sales of similar apartments in your building as a way to know your apartment’s worth. It will also give you an idea of why similar apartments may have different values.
Good day. Andrew Murray from the Apartment Specialists.Can you rely on the sales in your building to give you an idea of what the value of your apartment is?
The answer is, sometimes, but in many cases, no. That probably makes you think, how am I supposed to know what the value of my apartment is?
First of all, I’m going to tell you why you can’t solely rely on those sales and secondly, what you can do about it to make sure you’ve got a good idea what your apartment’s worth. I’m going to use the analogy of car yards, where they sell cars. In every city you’ve got a street where you’ve got car yards. They’re all in the same place, one after another. Would you go to one of those car yards – one where there’s about 20 of them – look at their sales in the last year and, let’s say each lots got 60 cars on it, you see those sales and you use that as your only way of finding out what the car you’re interested in is worth?
The answer is, no. The same applies with apartments. In Auckland central there’s over 24,000 apartments and that’s increasing. There’s over 450 apartment buildings in Auckland and each one, yes, is different, but for every apartment building there’s about five or six other buildings at least that are very, very similar. I’ll often see sales in one building and the other building will be very, very similar, yet one building is selling for much higher than the other. I’m really looking for buildings like this, because I know I can raise the values.
If I raise the values it means more people want to sell, you can see where obviously… That’s how I do business. Why is that? It’s because a person who previously sold in that building may have not been selling using the right methods, it may be because there was an issue surrounding the building, it may be because the sales that were sold in that building were undervalued, or units were in a terrible condition, there may have been situations around that sale which meant it had to be sold very quickly which means a lower price. So, you can’t always determine value for sales in your own complex.
What you want to know is, what other buildings compare to the building your apartment is in? What are those sales? Then the big one is, if you’ve got a specialist who specialises in apartments, they’re going to know exactly what the buttons are that determine value for your apartment. For example, if it’s an investor apartment it comes down to rent and outgoings. If it’s an unoccupied apartment, what is the emotional feel here? Are you going to get somebody who really wants to live here? Does it have a lot of light? Is it a good location? Does it have a car park? Things like that. Is it in a hotel? which means purely on return? Is it two bedroom? Is it one bedroom? Is it a studio? Is it a size? Is it bankable? Is it over 40 square metres or is it over 50 square metres because this bank [inaudible]? These kind of things.
When you’re talking to an apartment specialist, you want them to tell you why your apartment’s worth and what it is not – leading other the sales, because too many agents just look at previous sales and go, ‘It’s worth this’, and it’s not right. We’ve proved this time and time again, it’s very frustrating. There’s is a lot of trust that you’ve got to put in your agent, but you can ask them the questions to be able to tell if they really know your complex and the potential of your apartment, not what the previous sales are.
I hope that helps. It’s a bit of a grey area, so a hard one to explain. But at the end of the day, what I’m saying is, don’t just solely rely on the sales that have been in your building. Ask for more information, ask for other buildings that compare to it. I hope that helps.
Talk soon. Cheers.