What constitutes *comparable*?

We talk a lot about comparable sales analysis, but unlike shares, no two properties are identical. Even similar apartments in a tower have slightly different vistas, elevations or orientations.

It is absolutely essential to conduct a thorough analysis of recently sold, comparable properties before submitting a bid or an offer, but how do we determine which sales are comparable?

And, more to the point which sales aren’t?

The obvious considerations include

• Land size
• Style of dwelling/era of dwelling
• Distance from subject property, and
• Condition, accommodation and size of the dwelling.

In a pretty street adorned with uniform style houses like this street in Melbourne’s inner-west, it is reasonably easy to select comparable properties when analysing pricing.

Yet even in a scenario like this where it seems obvious to most, the subtle considerations are very important.

Despite this array of housing exhibiting identical block dimensions, same orientation, matching era, corresponding renovation quality and consistent layouts, there are technical (and invisible) considerations that must be assessed also.

The first is zoning. Take this street in Boronia for example. For those who own property on the eastern side of the street, looser planning restrictions apply than for those properties on the western side of the street. The subsequent rate of development and best and highest use of each allotment is noticeable when considering the prevalence of subdivision.

Many an aspiring developer have been caught out by a lack of appreciation of zoning restrictions, covenants and overlays.

This allotment above does not have an overlay affecting it, however the neighbouring properties opposite do. Heritage overlay is important, both for understanding the likely ongoing preservation of a pretty street, but also for the ease in which any changes/redevelopments could be coordinated.

Overlays can have a dramatic affect on the value of a property pending what the intended future use is.

A second consideration is easements. In most cases, easements cannot be built over. I’ve seen blocks with easements running through the centre. A prohibitive easement must be considered as an undesirable attribute and it will likely devalue a property.

Surrounding houses and streetscape is a critical consideration. A uniform, pretty streetscape will have stronger aesthetic appeal than a streetscape that is peppered with a blend of houses and units. Ease of street parking must also be taken into account when it comes to higher density development.

Orientation counts for so much, also.

A block with a north facing rear can eclipse a south facing, matching-size counterpart by up to 20% in some cases. Yesterday’s superb townhouse acquisition highlighted the popularity of a north facing rear. We faced four other aggressive bidders and fought it out for this crowd-pleasing orientation. Our clients can look forward to constant sunlight all year round, and a pleasurable entertaining space outside in the warmer months.

Much like orientation, vista needs to be considered too. It’s a popular saying in real estate that a view cannot be owned, but if it cannot be built out, it must hold inherent value. I recall years ago when I fought off prospective buyers in arguably, Portarlington’s most desirable spot. Elevated with superb 270 degree water views, this property deserved to be contested.

Something that many buyers often miss is the differential in value that a genuine, period era home commands in contrast to a reproduction dwelling. While the reproduction may offer a superior build quality or a higher degree of internal offerings, we can’t underestimate the appeal of the real thing.

Finally, market conditions and anomaly campaigns must be challenged. If a sale price appears to have been a surprise result, (either surprisingly strong or surprisingly low), a call to the agent is important. Clarifying whether it was a surprise result, a difficult campaign, a disappointing result impacted by a strange set of circumstances, or a crazy price affected by irrational buyers, it is important to determine whether it should have any bearing on the assessment of the subject property.

Not every ‘comparable’ sale is reliable or useful.