Melbourne Home Values and Replacement Costs Moving in Opposite Directions

Melbourne property values and rebuilding costs are currently moving in opposite directions.

Cotality's August Home Value Index shows Melbourne dwelling values fell 4.7% over the year to August. At the same time, ABS data shows input costs for house construction in Melbourne rose 3.5% over the year to the June quarter.

That divergence highlights why market value and replacement value shouldn't be treated as the same thing.

A property's market value reflects what buyers are prepared to pay at a particular point in time. An insurance valuation instead considers what it would cost to replace the improvements following a major loss.

That can involve current labour and material costs, demolition and debris removal, professional fees and the particular characteristics of the building.

So even when property prices are falling, the amount required to adequately insure a property may still be rising.

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Need an independent valuation for insurance purposes? Mason's Valuation Office provides valuations across Melbourne, including Darebin, Merri-bek and Whitehorse. Contact us on 0417 741 481 or visit https://propertyvaluation.melbourne/about-us/#contact.