Knowing the market value of property is highly useful, whether you're buying or selling, investing in property, or a long-term homeowner.

But how is the market value of your home calculated?

Is there a magic formula to follow every time?

We give you the ins and outs of market value calculations and what these can mean for your property journey.

What is a property's market value?

Sometimes called appraised value, the market value of property is its real-time worth in the current market and what real-life current buyers are prepared to pay for it.

A property's market value is not its current listing price or recent sale price, nor is it the property's market price (this is the price the buyer and seller agree upon when the home sells).

It's important to realise too that the Australian Tax Office, governments and your lender may all give your home different market values, as compared to a buyer.

For instance, the ATO advises that property valuers usually base their findings on the International Valuation Standards Council's definition of market value along with their valuation on the property's highest and best use.

How is the market value of property calculated?

There are three main ways in which to calculate a property's market value; however, the most common for residential homes is the comparable sales method, or in ATO terms, the comparison approach.

As the name suggests, this method will have you or a professional valuer compare a property to a similar one nearby - preferably one no more than 1km away and sold within the past six months.

The ATO advises this method should take into account a property's:

• Location
• Topography
• Environmental factors 
• Accessibility
• Utility services
• Town planning zoning and restrictions
• Site area
• Improvements
• Potential for an alternative use
• Any other factors likely to affect the property's desirability

We'd add the following too:

1. The location's population, popularity, demographics and infrastructure
2. Potential for natural disasters such as floods and bushfires
3. Current property market trends, including supply and demand
4. Overall economic outlook, including interest rates (locally, state and nationwide)
5. Property size, quality and features, including lot dimension

How can I learn the market value of my home?

Depending on where you're at in your property journey, you may wish to engage a professional valuer to assess a property's market value.

But it's worthwhile doing your own research too, if nothing else because it will give you a good idea of the current property market and what to expect when both buying or selling.

Besides which, both the professional and the average Joe's calculations are based on the same details.

There are also a bunch of online ways to check your current or potential property's market possibilities from CoreLogic's Property Value website; to Smart Property Investment, SQM Research and for wider details on the property's local region and cities, .idcommunity.

Common issues to bear in mind

Emotional attachment 

This goes for both buyers and sellers!

Long-term homeowners can be biased towards the property, and rightly so - but they may also not want to see its faults, resulting in an overpriced market value.

Keen home buyers too - especially first-home buyers - may quickly fall in love with a home and be ready to purchase it well over its market value.

Both groups should therefore bring in an objective friend or family member to help them.

Not playing fair when comparing

For potential owner-occupiers in particular, it's difficult to remain objective when buying or selling.

But when comparing market values, make sure you do so fairly.

Are you comparing your prized home with a completely different one miles away?

Or worse, are you comparing it to a mansion next door and as a result, quickly believing you can't possibly afford your dream home?

It may take longer but staying smart and objective - or having someone with you that is! - will definitely pay off in the end.

Little knowledge of the market

This issue can only be improved by plenty of research including talking with industry experts and reading articles from or with them; keeping a close eye on statistics; keeping a note of interest rates - they're rising rapidly lately, in case you didn't know! - and similar.

It's a great idea to attend local open for inspections, as these will help you learn what type of people are searching, and for what kind of homes, as well as how much people are willing to pay for property in your area, also giving you a better idea of the market value of property. 

What's next in your property journey?

Buying or selling off-market with Listing Loop reduces the risk of missing out on a great home for a great price - or a great sale. And our team is always happy to help with all the dramas and stressors of house buying and selling, which is why we’ve brought the services you need altogether, under one roof.

Listing Loop is a marketplace for off-market and pre-market properties for sale but we’re also an end-to-end property transaction platform helping to remove friction from the buying, financing, and selling processes.

For those buyers who require extra support, for a small fee, our Buyer Assist service provides them with the opportunity to work with one of our buyer’s advocates, who, not only have access to information unavailable to the public but also the requisite experience and expertise to remove a large chunk of the stress from the buying process.

We can also help you navigate this choppy market we're currently experiencing, as well as support you with refinancing through our sister company, Lending Loop.

Sign up to become a member today for FREE and take advantage of our exclusive member property services.