Alexlee,
1. Firstly, I do not believe those BANK vlauations as per said in this thread. Banks are not stupid! For a new house, bank's valuation is LAND + Construction Cost. They will not give you extra 10-20% profit into it.
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Dear TheAnalyst,
1. As far as the construction loan is concerned, I agree with you that the bank valuation is likely to come up as the land price + full construction costs.
2. However, when the house under construction is subsequently completed with all the required house finishings, the bank valuations for such a newly completed house, will normally come out a lot more higher than the basic land price + full house construction costs.
3. Based my own past house development projects' actual experience, the basic land+ house construction costs for one of house constructed = A$206,000, back then in April 2003;- however when the house was subsequently completed in December 2003, its new bank valuation value has managed to come up to A$305,000 subsequently.
4. Perhaps, I can agree with you that the bank valuation for the new completed houses in Perth may not come up as high in today's prevailing negative market sentiments atmosphere and at this stage of the Declining Market Property Cycle Stage at this point in time, as compared to what it has previously been, in my own experience as illustrated above, however, I still believe that it is still a lot higher than its basic land price + house construction costs, provided that the house development was "financially feasible" in the first place. or/and the present Perth housing market has not "crashed" down suddenly.
5. Consequently, I agree more with Ausprop's feedback, than what your views here.
6. For your further comments and discussion, please.
7. Thank you
Cheers,
Kenneth KOH