What is a Comparative Market Analysis?
A Comparative Market Analysis (or CMA as we know them) is a report that compares your property to other similar properties in the same geographical location. The report gives a detailed description of your property, including the bedrooms, bathrooms, and car parks. The report normally shows you what you paid for your property and when. The real benefit of a CMA is that it compares what you have to other similar properties. It is not a figure plucked from the air, it is factual and relevant.
How can I get a CMA?
You should be able to ask your agent for one. Most agents will subscribe to a service that allows them to create an endless number of reports, this may be restricted to a certain geographical location. Those agents that don’t offer this service are more than likely trying to save money and in my opinion are not as well positioned to give you the right advice.
If you are self-managing your property and don’t have an agent, it is possible for you to purchase one of these reports, from the same providers the agents use.
What is not a CMA?
If you ask your agent for a CMA and instead receive an email full of hyperlinks to properties that have been listed on www.realestate.com.au or www.domain.com.au you are only getting half the story. What’s missing from this is the comparison between your property and the others in the market. This email is also missing the growth statistics and trends over the recent period. This email will also likely be missing important notes explaining the difference between the result and your property. An example of this would be “This property was unrenovated, your property is renovated, added $50,000”.
Why do I Need a CMA?
A CMA report is vitally important when it comes to setting the rental or sale price of a property. It is very expensive these days to advertise properties online. If you get it wrong, you will either waste your marketing dollars with no enquiry or you may undersell the opportunity and miss out on valuable income. A detailed CMA report will show you the median and average prices, it will show you how long your competitors have been advertising for and it will show you the journey they have been on with their price. A CMA report allows you to learn from those that have gone before you.
The Current Value of a CMA
The rental market in Melbourne was severely affected during the COVID-19 pandemic. There was a mass exodus of people from Melbourne’s CBD and surrounds as people headed home to bunker down. Almost over night there was an ever supply of apartments in the city and the rental values fell dramatically. This decrease in rent bought a new group of residents, looking for lower rent than their predecessors.
Over the last six months, rents have been returning towards pre-COVID levels. They are not completely back to where they used to be but heading in the right direction. These recent increases have forced some residents to begrudgingly vacate due to the fact they can no longer afford to stay in their apartments. So now we have the juxtaposition where tenants want to stay but can’t afford to and landlords expect the receive the increase that is due to them.
This is where the real value of a CMA comes into effect. In our experience providing the same CMA report to both the Tenant and the Landlord saves time by setting expectations on what is fair and responsible for the outset of the negotiation.
It is this same report we have been using when challenged by Consumer Affairs Victoria (CAV). In every instance we have successfully negotiated the increase to a fair and responsible rent.
Summary
Make sure your agent can provide you with a detailed report on what the market rates are for your property. Not only will it get the most from your marketing money, but it will also speed up the process and could be vitally important should you be challenged for what is perceived as an excessive increase from your Tenant.
If your agent doesn’t offer this service, we would be happy to provide you with a free (no obligation) report for you. Please contact Re-define Real Estate to arrange this.