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Executive Summary
Purchasing property at the wrong time of property market cycle can cause huge loss and
negative impact on your wealth. On the other hand, purchasing property in a rising property
market cycle can increase outlay and also diminishes the property profits by selling real
estate in a slowing market. All these risks can be avoided by knowing the property market
cycle. This report covers the current state of property market cycle in Australia based on
various economic and financial variables i.e. vacancy rates, rental growth rates,
capitalization rates, home price changes, unemployment, interest rates, etc. Considering
these factors, their impact on the property market and price has been analyzed. Moreover,
a residential property is selected, and all the information related to that property is
collected and compared with the similar properties that has been sold in the same area. At
the end of this report, valuation approaches are discussed, and the best suitable valuation
approach is identified for the selected residential property and a valuation report is
developed. This would enhance the knowledge and skills in property market and valuation
approach.

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Table of Contents

1. Introduction......................................................................................................................................3
2. Current State of Property Market Cycle...........................................................................................4
3. Property Details................................................................................................................................9
3.1 Valued Information......................................................................................................................9
3.2 Local Information.........................................................................................................................9
3.3 Local Factors................................................................................................................................9
3.4 Properties Comparison..............................................................................................................11
4. Valuation Approach........................................................................................................................11
4.1 Common Valuation Methods.....................................................................................................12
4.2 Appropriate Valuation Method..................................................................................................12
Conclusion...........................................................................................................................................12
Appendixes.........................................................................................................................................13
Recent News Article........................................................................................................................13
References..............................................................................................Error! Bookmark not defined.

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1. Introduction
There are hundreds of individual property market cycle exists in Australia that are linked
with each other such that in case one region is booming, other may experience a downturn.
A property market cycle can be simply described as if the population of Australia grows,
there would be an increase in demand for the property due to which the values of property
would increase. To maintain a balance between supply and demand, builders and
developers would start constructing new houses. However, this cycle goes on and pendulum
keeps on swinging too far and overtime, and mostly it ends up with an oversupply of
houses. This oversupply in turn reduces the property values and rents (Yardney, 2019).

There are four phases of property cycle i.e. boom, downturn, upturn and stabilization
(Kioleoglou, 2016) as depicted in the figure below.

Figure 1 Property Market Cycle Phases (Yardney, 2019)

Each of these phases play an important role in property market cycle. During boom phase,
price go up and increases rapidly. In downturn phase, property prices stop increasing and
sometimes also drop. Property values move up really slowly in equilibrium phase. And in
upturn phase, values tends to increase again. However, length of these phases and a
particular property market cycle is affected by various factors such as economic growth,
population growth, inflation, interest rate, exchange rate, rental growth rates, vacancy
rates, capitalization rates, and many more. A graph presented below illustrates the changes
in house prices over two property cycles.

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 Figure 2 Property Market Cycle (RealEstateView, 2020)

2. Current State of Property Market Cycle

As the consumer’s confidence is continuously improving, house prices are lifting in Australia
(Yardneys, 2020). The current state of property market cycle in Australia shows strength and
continuously increasing and expected to be finish at a high note by the end of this year. The
heat map presented below shows that Australian property prices bumped a 0.4% fraction
higher in this month. This indicates that the bottom of the property cycle now has been
passed that occurred in mid-October.

Figure 3 Prices Heat Map (Harling, 2020)

During this pandemic that causes an economic fallout, housing markets suffers a lot and
significant falls have been seen in the prices. However, now the prices are lifting up around
Australia as confidence recovers. A below graph depicts the regional price divide since the
pandemic and shows that Australia has passed the bottom of this cycle.

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 Figure 4 Major Capitals Median Values (NAB, 2018)

Property values in certain areas are increasing with the shortage of A-grade homes and
investment properties. Whereas B-grade properties are selling at a discount and no body is
looking at the C-grade properties. A below table shows the home price changes in capital
cities.

Figure 5 Capital City Home Price Changes (CoreLogic, 2020)

The inner city apartment sector still facing a fall in property values due to unemployment
factor that will remain high and there is still some economic effect from the recession.

Figure 6 Monthly Change in Home Prices (Statistics, 2020)

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 Figure 7 Change in Home Prices over Past 12 months (Lawless, 2020)

There are very few properties that are listed for the sale while there are a lot of potential
buyers looking for good properties. The overall properties listed for sale is down 14.7% as
compared to the previous year.

Figure 8 Properties Listed for Sale (Owen, 2020)

COVID-19 pandemic hits badly to the rental housing market. As the supply has increased, it
reduces the demand for rental properties. Renters are mostly affected by the economic
impact. International arrivals also decreased due to border closures. In this period, number
of vacant rental properties increased, as new houses have been completed.

Particularly in Sydney and Melbourne, absence of new and returning international students
affected the rental property market. Asking rents and vacancy rates are shown below in the
graphs.

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 Figure 9 Capital City Asking Rents (SQM, 2020)

Figure 10 Capital City Vacancy Rates (SQM, 2020)

Over the last week, in Melbourne, around 2,025 houses and 878 apartments were sold. And
as soon as lockdown restrictions have been lifted, these numbers seems to be growing. In
Sydney, 1,880 houses and 1,078 apartments were sold that shows the property market is
going on with a steady growth. A table below shows the private treaty sales.

Figure 11 Capital Cities Private Treaty Sales (CoreLogic RP Data, 2020)

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Low housing prices, flattening corona virus curve, ease in restrictions and low interest rates
are the main factors behind the growth in housing prices.

National Australia Bank (NAB) observes the decrease in population growth due to closure at
borders and considered it as the key risk factor affecting the house prices specifically for
Sydney and Melbourne where international students lived mostly.

For the last few decades, population growth is supporting the property markets in Australia.
With the increase in population, there was more demand for the dwellings each year in
order to facilitate and accommodate the population. 60% of property market growth

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depends upon the international population. As soon as the borders will open, this would
increase and affect positively.

Moreover, where economic growth is badly impacted due to COVID-19 pandemic, some
states are recovering, and all the economists believe that Australia will see a significant
economic growth and that will also influence the property market.

Figure 12 Economic Growth Forecasts (M. Yardney, 2020)

With all the statistics and factors that has been observed, it shows that Australia’s property
market is deeply influenced during the COVID-19 situation and various other factors also
affected the property market cycle. Through different graphs and statistics, it can be
observed that this year during pandemic period, specifically from March to September,
property values decreases. However, now with the increase in consumer’s confidence and
ease on restrictions and settling down the corona situation, house prices are increasing
again, and a positive increase is expected in future with the increase in economic growth,
reduction in unemployment, opening borders, etc.

3. Property Details
A residential property is identified for sale located at 10 Mottlecah CCT, Craigieburn, Victoria
3064, Melbourne, Australia. This property is a modern edge brand new home in the centre
of Craigieburn and comprises of various features that one have in their wish list (RealEstate,
2020).

3.1 Valued Information

Table 1 Valued Information (RealEstate, 2020)

Property Details
2
Land Size 280 m

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 House Size 167.23 m2
Bedrooms 3
Bathrooms 2
Garage Spaces 2

Including the above valued information, this house includes the fully furnished and
equipped kitchen with a living and dining areas. Moreover, it has a double remote garage
with internal access, 900 mm stainless steel appliances, stone benchtops, LED lights, ducted
heating system, evaporative cooling system, letter box, automated dishwasher, floorboards,
fully fenced, and an active broadband connection (RealEstate, 2020).

3.2 Local Information

This home is situated near Highland Shopping Centre, Highland Hotel, Newbury Primary
School, Newbury Child & Community Centre, Pelican Childcare Newbury Boulevard, Mount
Ridley Road and a driveway to Tullamarine International Airport.

3.3 Local Factors

All the information related to factors that can affect the value of the selected residential
property is gathered from the Australian Bureau of Statistics website. This website shows a
complete survey of 2016 Census QuickStats. Only 2016 Census stats were available that’s
why all this information is considered. The current sale price ranges for the residential
properties from $ 552,500 for houses to $ 370,000 for units. With $ 400 PW rental income
with an annual rental yield of 3.8% for houses and $ 350 PW with a rental yield of 4.9% for
units (Estate, 2020).
Table 2 Local Factors Information (ABS, 2017)

QuickStats (2016)
Population 50,347
Families 13,145
Average People per Household 3.3
Weekly Household Income $ 1,504
Monthly Mortgage Repayments $ 1,733
Weekly Rent $ 335
Average Motor Vehicles 1.9
People Worked Full Time 13,982
People Worked Part Time 6,653
Unemployed 2,105
Occupied Private Houses 14,536
Unoccupied Private Houses 844

A floor plan for the identified residential property is presented below.

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 Figure 13 Floor Plan

3.4 Properties Comparison

This residential property is compared with the details of other 5 similar properties sold in
this area within last 2 months and all the collected information is presented in the table
below.

Property Address Sale Bedrooms Bathroom Garage Land

Price s Spaces Size m2
10
Mottlecah
CCT, $ 489,000 3 2 2 280
Craigieburn,
Vic 3064
24 Millau
Avenue,
$ 535,000 3 2 1 262
Craigieburn,
Vic 3064
22 Rialto
Circuit,
$ 575,000 4 2 1 262
Craigieburn,
Vic 3064

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 158
Highlander
Drive, $ 509,500 3 2 2 264
Craigieburn,
Vic, 3064
19
Coolamon
Drive, $ 439,000 3 2 1 269
Craigieburn,
Vic 3064
1 Future
Way,
$ 600,000 4 3 2 272
Craigieburn,
Vic 3064

Comparing the above information shows that property values are different within the same
area. This comparison shows that location, construction material and design really does
matter and impact the property value. Properties with the same land sizes are sold out at
different price rates.

4. Valuation Approach
Property valuation is an important factor in real estate investing. Knowing the value of
investment property is important to understand how much rent you can charge or how
much property taxes you have to pay (Abdul-Samad, 2017).

4.1 Common Valuation Methods

There are three common valuation methods that are used worldwide to value property.

 Market Comparison Approach – A comparison approach is utilized to compare the

property being valued with the other similar properties that have been sold recently
in that area (Wallwork, 2020).
 Income Approach – This approach is used by calculating the income generated by
the property being valued or the income it could generate potentially.
 Cost Approach – Estimate the cost it would take to build a same property within the
same area.

Only one approach can be utilized at a time instead of combination of all three approaches.
As all these approaches are different and independent from each other. Each approach can
give different results in terms of valuation; thus, it is important to choose the suitable
valuation method depending upon the situation.

4.2 Appropriate Valuation Method

The most suitable and appropriate valuation method for the chosen residential property is
Market Comparison Approach. This is one of the most common and typically used valuation

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method. Moreover, it is quite easier to implement on the residential property. Just check
out some houses sold on the same street in the same area and roughly work out a value
before putting it on the market. This value can be further adjusted by looking at the
condition of the house, size, specifications, and other variables such as supply and demand
in the local real estate market during the current situation.

This approach is appropriate as we have already compared the sales prices of other similar
houses in the same area and it shows that other houses with the same size and
specifications have a higher sales price which is not so right for this residential property. The
sales price for this house is $ 489,000. However, the land size of this house is more as
compared to the other houses. One important thing that is required to be consider that the
house size is less as compared to the land size. This house did not fully build on the land
size.

However, on comparison with the other houses, the value of the selected property is
estimated around $ 502,000 - $ 525,000.

The house is high furnished and equipped with automated equipments such as remotely
controlled garage, a dishwasher, heating and cooling system, and many other features.
Considering all that features, it can be considered that the property is being sold at a low
sale price. However, it’s sale price should be higher than that. And with the ease on
restrictions and considering other local conditions, this house is perfect to meet the family
needs.

Conclusion
All the key aspects including the current state of property market cycle in Australia, phases
in market cycle, impact of different factors on marketing cycle, impact of COVID-19,
property details, comparison with other similar properties and valuation approach has been
discussed in this report. It can be concluded that all the factors influences the real estate
investing and with the knowledge current state of property market and valuing properties,
one can easily invest in the real estate business or get an idea of the value of their house.

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Appendixes
Recent News Article

References
Abdul-Samad, H., 2017. WHAT ARE THE MAIN PROPERTY VALUATION METHODS?. [Online]
Available at: https://www.mashvisor.com/blog/property-valuation-methods/

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ABS, 2017. 2016 Census QuickStats. [Online] Available at:
https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quicks
at/SSC20657

CoreLogic, 2020. CoreLogic Home Value Index - Daily Indices. [Online] Available at:
https://www.corelogic.com.au/research/daily-indices

Estate, R., 2020. Craigieburn, Victoria 3064. [Online] Available at:

https://www.realestate.com.au/neighbourhoods/craigieburn-3064-vic

Harling, J., 2020. End Period Changes - CoreLogic Hedonic Home Values Daily Indexes.
[Online].

Kioleoglou, K., 2016. PROPERTY CYCLE – THE EQUILIBRIUM OF THE PROPERTY MARKET.
[Online] Available at: https://www.propertyinvestmentnews.com/property-cycle-the-
equilibrium-of-the-property-market/

Lawless, T., 2020. CoreLogic October home value indices: Australian housing values move
into recovery mode. [Online] Available at: https://www.corelogic.com.au/news/corelogic-
october-home-value-indices

M. Yardney, 2020. Latest property price forecasts revealed. What’s ahead in the next year or
two?. [Online] Available at: https://propertyupdate.com.au/property-predictions-for-2021-
revealed/

NAB, 2018. AUSTRALIAN MARKETS WEEKLY. [Online] Available at:

https://business.nab.com.au/wp-content/uploads/2018/05/australian-markets-weekly-14-
may-2018.pdf

Owen, E., 2020. CoreLogic sales and listings numbers reveal an unlikely city on the rebound.
[Online] Available at: https://www.corelogic.com.au/news/corelogic-sales-and-listings-
numbers-reveal-unlikely-city-rebound

RealEstate, 2020. 10 Mottlecah CCT,, Craigieburn, Vic 3064. [Online] Available at:
https://www.realestate.com.au/property-house-vic-craigieburn-133846458

RealEstateView, 2020. The Property Cycle. [Online] Available at:

https://advice.realestateview.com.au/buying/understanding-the-property-cycle-when-
buying/

SQM, 2020. WEEKLY RENTS CAPITAL CITY AVERAGE. [Online] Available at:
https://sqmresearch.com.au/weekly-rents.php?avg=1&t=1

Statistics, A. B. o., 2020. Residential Property Price Indexes: Eight Capital Cities. [Online]
Available at: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/
residential-property-price-indexes-eight-capital-cities/latest-release

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Wallwork, N., 2020. 3 Main Real Estate Valuation Methods. [Online] Available at:
https://www.dummies.com/personal-finance/real-estate-investing/3-main-real-estate-
valuation-methods/

Yardney, M., 2019. What you need to know about property cycles. [Online] Available at:
https://www.canstar.com.au/home-loans/australian-property-cycle/

Yardneys, M., 2020. This week’s Australian Property Market Update. [Online] Available at:
https://propertyupdate.com.au/australian-property-market/

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