As I was being attacked by the media I managed to see the type of valuations they were using, and every Valuation was using old properties which were inferior in quality. So I had an accountancy firm from Sydney do a valuation with Herron Todd White so that it could not be polluted or influenced by my name being involved. I wanted to find out what the difference was between old and new properties as I beleived it only fair to compare apples with apples. I also knew how easy it was for the media to manipulate the public into believing things were different to reality. The valuation was asked to be done on all major cities throughout Australia in a town with new townhouses on one side of the street and old on the other with no changes as to value other than new versus old so that views or other factors did not change the outcome.
The Herron Todd White Synopsis
A market commentary on new and 5-10 year old 16 square townhouses (150 sq metre) in Adelaide, Brisbane, Gold Coast, Melbourne, Newcastle, Perth and Sydney. 25th June 1999
The Results NEW 5-10 Year Old Difference %
Adelaide $240,000 -$275,000 $180,000 - $230,000 $52,500 20.39
Brisbane $300,000 - $380,000 $280,000 - $310,000 $45,000 13.24
Gold Coast $140,000 - $150,000 $100,000 - $120,000 $35,999 24.14
Melbourne $240,000 - $300,000 $175,000 - $230,000 $67,500 25.00
Newcastle $150,000 - $200,000 $120,000 - $150,000 $40,000 22.86
Perth $182,500 - $235,000 $145,000 - $175,000 $48,750 23.35
Sydney $360,000 - $410,000 $300,000 - $350,000 $60,000 15.58
Average $49,821 20.65%
The Outcome is quite astounding when you realise that this was done pre GST which would have added a further 10% onto the new prices and not the older properties, so the difference now could be as high as 30% on average. Now you might ask why is it in the best interest of the purchaser to have a new property rather than an old one, firstly you get more rent for a New property, secondly you have less maintenance and repairs as you are covered by warranties. Thirdly you get a lot more tax deductions with the new properties compared to the old ones. So a new property can easily cost you $100 to $200 less than an old property even when it is more expensive.
You can walk into any Real Estate Agent in the country and they will have the perfect Investment property bargain for you Guaranteed, as they listed it for sale and they need to sell it. They forget, don't know, or choose not to look at Building Depreciation, Fittings and Fixtures Depreciation, Setup costs, Rent Return, Maintainence, Rental Vacancy, ability to attract a tenant, Loan Structures, Tax Rebate weekly and what the property really costs you, but hey they have a picture in the window and a listing agreement and they really need to sell it. To bad if it costs you an extra $250 per week. It was a bargain after all?
If a property costs $100 per week more that is $5,000 per annum or $50,000 more over 10 years. The reason we were succesful is because we showed people not only this but also how to structure their investment property correctly which is why they all cost less than $90 per week and some actually cost nothing because we restructured everything in the best possible way. If it was an extra $250 per week that is $13,000 per year which is an extra $130,000 over 10 years, not much of a bargain now is it?
The question I have is; how can a valuer not compare new sales with new sales, just by comparing old to new the New should be 20% more expensive, and people will and are paying this premium for all of the benefits. So how can the media and Herriot go on about 2 Tier Marketing when all it was was selective valueing. This was shown to be the Facts when the Federal Court Judge in the ACCC case ruled that the Valuation of $135,000 was not accurate and was to low, as they had disregarded all of the new property sales to get a low valuation. The Judge also added that there was no evidence to suggest that the properties were overpriced, which means the property was correctly priced at $159,900. Yet the Papers would have you beleive Mr Herriot was accurate and he valued the property at $90,0000.
No new property would be able to get even close to a fair valuation and therefore be sold and financed if every valuer used the methodology Herriot did to get his low valuations, it would stop the whole building industry dead. It is very easy to see how Herriot and the Media can come up with low valuations, the question is why did they use it to try and destroy me and my business?
There was no way in the world that I could get a fair valuation or even have a chance of looking as if we were selling a reasonably priced property if the valuer used old inferior properties to gain his valuation. According to HTW it would be 20% less just because New was compared to Old.
So how could I not look like a conman when the valuers used old inferior properies compared to our New Superior properties, they had to be at least 20% more expensive according to HTW?
