As Melbourne’s property values continue to climb many homeowners are left wondering what their property is worth in today’s market.

According to the Real Estate Institute of Victoria, the Melbourne median property price, currently estimated to be $524,500, grew by 29.5 percent in the year to March, representing a rise of almost $120,000 in only 12 months.

But although there are many astute home owners and investors that understand the factors which influence a property’s value, there are many more that do not.

WBP’s research showed that in the first quarter of 2010 Australian property owners over valued their residential asset on average by more than $22,000. In extreme cases, some property owners estimated their property to be worth 50 percent more than its actual value. These flawed estimates in some instances accounted for a difference of hundreds of thousands of dollars.

But, while a proportion of these extreme cases where due to significant fluctuations in the country’s prestige property markets in 2008-09, there remained a significant trend of overvaluation in the lower to middle market, which has also been subject to significant growth during recent times. This is often due to the emotional attachment we have to our homes.

Of more than 6,500 Australian property owners with property in Adelaide and on Australia’s Eastern Seaboard, less than half correctly valued their assets within a variance of 10%. Furthermore, of these states, property owners in New South Wales were amongst the poorest estimators, followed by Queensland and Melbourne, while South Australians were generally the most conservative overestimators.

It is no surprise that the majority of Australians are confused by the rapidly changing property markets but when estimating the value of a property there are some key strategies to manage expectations.

Research is an important step in accurately determining the value of a property. Analysing the comparable property sales that have occurred in the previous six months can provide a sound guide. Consider those properties in close proximity to the subject property and those of similar size and design. It is important that comparable properties have the same number of bedrooms and bathrooms and other similar features such as garages, gardens and entertaining areas. The age and location of the dwelling is also a factor to consider.

If the property is a modern double storey dwelling don’t compare it with a single storey period dwelling. Remember, compare apples with apples. Once similar comparable properties have been selected it is important to carefully analyse the differences and adjust the estimated value accordingly.

However, the best way to accurately determine the value of a property remains to enlist the services of a qualified and experienced valuer who uses a systematic and methodical process to accurately determine the value of a property at a specific point in time.

Greville Pabst is CEO and Director of WBP Property Group, servicing clients around Australia. He regularly provides property value and market advice to corporate and private clients as well as the media. www.wbpvaluers.com