EXPLANATION OF AND THE ACCURATE QUANTIFICATION OF THE PricingReality™ PROPERTY VALUATION AND MMP PROPERTY HEATMAP© TIMING METHODOLOGY
Comparative pricing valuations do not in most cases represent true value. Market sentiment is such that prices will exceed true value as demand goes up, and be lower than true value as the market cools.
Demand to supply is at all times subject to the availability and affordability of financing in the market and is affected by interest rates, wage growth, economic conditions, employment and population growth – to name just a few factors.
The affordability of the composite of purchasers and renters at a given time in the market dictates the demand for property. The greater the demand the more property prices will increase and likewise a falling demand leads to price stagnation and property price decreases.
PROPERTY PRICE ≠ PROPERTY VALUE
The true value of a property is set by the actual affordability of what a purchaser can afford to pay for the mortgage and on what a renter can afford to pay by way of rent.
The only difference between a purchaser and a renter is in the deposit and costs that the purchaser needs to come up with in acquiring the property. Thereafter the purchaser pays for a loan and the renter pays a rental. In both cases, the purchasers and renters can usually afford to spend approximately 30% of joint household income to fund the ‘roof over their heads’.
It thus makes sense to value property according to this affordability factor.