How much is reasonable for a property now?

Everyone has been talking about sky rocket prices in properties. How do we know what is a reasonable price for a property?

I have came up with a way to calculate it. We will still use my favourite formula to do it.

Future Value = Present Value x (1 + Rate of Inflation/100)^n.

We'll take it that inflation rate is at 4.5% for the past 10 years.
A mid-floor 3 Bedroom unit in Lilydale was sold by developers at $430,000 in 2001.
Using the formula above,

Value in 2011 = 430,000 x (1 + /100)^10
                      = 430,000 x (1.045)^10
                      = $667,777

This number is used as a guide for me when I do purchase a property. A mid-floor 3 bedroom unit in Yishun is about $668,000 to me. Currently units in lilydale are selling at around $720,000 to $770,000. This is considered over valued for me. Therefore any nearby development especially the ones in Sembawang, are way above the value. Each 3 bedroom unit was sold at asking price of $1 million! That's really daylight roberry.

The value above can only be an estimate to the condominiums of the same area. We cannot use the above value to compare with properties in the central and central core region. We have to use the price of a condo, 10-years ago, in the area to calculate our personal valuation.

Happy investing.

Cheers.