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Keeping valuations robust during uncertain times

While it’s no surprise to many, QV’s April House Price Index shows house prices continue to fall. March saw 2023’s largest drop at 1.4%, with April’s average reduction at 0.6%. National average property values now sit just above $900,000, 13.3% down on April 2022 but 22% higher than pre-pandemic prices. 

With a loss of market confidence as a result, be assured Southern Cross Partners uses robust valuation methods when valuing property to try and mitigate any potential headwinds.  

This month we checked in with SCP’s Credit Manager, Mark Whelan, to outline how valuations work for all SCP investments. 

Firstly, he says valuations underpin all investment securities. The property’s value forms part of the final loan-to-value ratio (LVR) equation and ensures we’re lending to the right level. We can’t be certain of future market changes or events beyond anyone’s control, which is why valuation and LVR are so important in overall lending decisions. 

We take valuations seriously at SCP and we don’t accept just any valuation from any registered valuer. We use Panel, or preferred valuers, who we know are a trusted source of information.  

Secondly, we check the comparable sales used to support the given value is truly comparable through our own research. We may also ask for a real estate appraisal or comparative market analysis (CMA) to cross-reference the detail given in a valuation.  

As you can see, Mark considers a range of valuation methods depending on each loan’s circumstance. But regardless of which method we use, we always go with the method that gives us the lowest value. Here’s a break down of different valuation methods: 

  • Registered valuation (RV) 
    • An RV places a value on a property based on size of the land, condition of the property, and the state of the local market. These valuations are conducted by a certified registered valuer of our choosing. It’s specific to the property we’re lending on and in almost all cases the valuer needs to visit the property in person to complete their work. 
  • Comparative market analysis (CMA) 
    • A CMA estimates the value of a property by looking at similar recently sold properties in the same area. These valuations analyse and compare information about property such as location, total square metreage, number of bedrooms and bathrooms, the year the property was built and any completed renovations. We use leading property data, information, analytics and services provider, CoreLogic, to determine our CMAs. 
  • Sale and purchase agreement 
    • Sale and purchase agreements are a legally binding contract between a vendor and a buyer when selling a property. This outlines exactly what the purchaser is paying for a property. 
  • Real estate appraisal
    • A real estate appraisal is conducted by real estate agents and uses similar information to a valuer such as recent sales. However, it is not as in depth. 

To understand more about valuation methods, feel free to give our friendly investment team a call. They’re always here to answer any questions you may have.