Property Valuation: How to use it to Maximise Your Profit?

PropertyGuru Editorial Team
Property Valuation: How to use it to Maximise Your Profit?
In Singapore’s real estate market, there is a not-so-secret tool used by astute asset buyers and home flippers to minimise their losses and maximise profit when purchasing or selling a property.
It’s property valuation! Yes, you heard it right. Equipped with this ordinary and innocuous sounding document, property connoisseurs can steer clear of bad acquisitions and make sure that they can get the best price available. If you want to know more, do read on.

What is real estate valuation?

In essence, this is an estimate of the fair market value of a property, whether it’s an HDB flat, private condo, landed housing, retail space or a factory unit. This is extremely important especially if you are considering selling your property, as this serves as an indispensable benchmark, through which buyers and sellers haggle over the price of a property.

What determines your property valuation?

1. Indicative Valuation

Indicative valuation is a simple and rough calculation of your property’s worth. Typically, this can be obtained by averaging the selling prices of all similar properties transacted recently within the vicinity of your area.
This kind of valuation is mostly done by unit owners by asking around and researching records. However, this method can be time-consuming and inaccurate. A more convenient and easier way is to go to a reputable real estate portal or listings website, as these often feature valuation tools and a database of the latest transactions. You may also consult a licensed property agent, who is familiar with your area’s market. They usually provide estimates for free to attract a client.

2. Actual Valuation

In comparison, actual valuation is more meticulous as it is carried out by real estate professionals like valuers, who are paid a fee to assess a property’s estimated market price based on the following:
  • Property’s address
Is it situated in a secluded place or in a prime area? Prime means the property is strategically located close to amenities, transport nodes and major roads. Such properties also attract significant consumer traffic.
  • Zoning
What is the intended use of the property according to the Urban Redevelopment Authority? Is it zoned for residential or commercial? Please note that some properties have mixed usage like F&B on the first level and residential on the second floor.
  • Property’s land area, built-up space and number of rooms
Generally, larger properties command higher prices on absolute terms. However, there are many cases, where smaller properties like shoebox units fetch higher psf prices than bigger ones. Moreover, investors typically prefer properties with more rooms for rental purposes.
  • Building age and state
Typically, new properties with modern specifications are more expensive than ageing properties. The former are also more in demand due to easier upkeep. If you’re buying a property in the hope of selling it eventually for a tidy profit, it is advisable to keep it in good condition as badly maintained properties fetch a lower price and are not easy to dispose.
After a valuer or surveyor finishes their job, you will get a comprehensive valuation report that describes your property’s land area, structure and status along with the market price.
Important: If you can afford it, experts recommend that you engage three different valuers and use the median of their calculation to obtain a more accurate estimate of your property’s price.

How do you receive your HDB or private condo valuation report?

HDB homeowners need not worry about valuation cost as they can get a valuation report on their unit from the office of the Housing & Development Board. Accuracy is also not an issue as the valuation will be carried out by qualified staff licensed by the Inland Revenue Authority of Singapore (IRAS).
For owners of private properties, they can engage licensed appraisers who are members of the Singapore Institute of Surveyors and Valuers. Another option is to hire property consultancies that offer this kind of service, including DTZ, JLL, CBRE, Propnex, ERA Realty, Huttons Asia, Knight Frank, OrangeTee & Tie and Colliers International.

Real Estate Valuation Perks

A good valuation report, coupled with an in-depth grasp of the market value of similar properties transacted within your vicinity, provides you with a crucial tool that will assist you in negotiating the property’s price with potential buyers. Below are the other advantages of a valuation report:

1. Helps in getting funds

As standard industry practice, financial institutions require a valuation report before a property buyer can obtain a mortgage or housing loan. This is because this document will be used as a reference by banks on how much it can lend.
Under the new cooling measures announced on 6 July 2018 for Singapore’s private residential market, individual borrowers buying their first property can only get a loan-to-value (LTV) ratio of between 55% to 75 %. So if the property costs $1 million, the loan quantum you will get is only $550,000 to $750,000.
Important: If the property you want to purchase has different valuations, the bank will utilise the average of two or more valuations.

2. Smoother negotiations

By bringing along a valuation report to the negotiating table, major disagreements over the property price are less likely to occur and it’s easier to create rapport between the seller and buyer, enabling both of them to close the transaction as quickly as possible.

3. Protects interest of buyer and seller

Thanks to this document, sellers are less likely to agree to an unfavourably low price, while buyers are guided from spending too much. According to experts, it’s not advisable to purchase a property if the price is 3% higher than the average value of similar properties nearby. Likewise, sellers should not accept if the offered price is lower than the market value by 3% or more.

Other Things that Impact Property Price

Aside from the aforementioned material factors that professional valuers take into account to determine a property’s value, there are also intangible things that affect the price.

1. Property’s Sentimental Value

There are some homeowners who significantly increase the asking price of their property due to their emotional attachment to it. This happens when some sellers list their homes for sale at an exorbitant price due to its sentimental value. But due to the high price, the property is often left unsold for months or years.

2. Blood Ties

Inter-family transactions typically don’t reflect the actual value of a property. For instance, parents selling their home to their children, or the transfer of ownership among relatives is usually undervalued.

3. Desperation

There’s a market saying that a fair market price is not possible if the seller is desperate to sell or when the buyer is desperate to buy. For instance, a man who needs to sell his home to fund the medical expense of his terminally ill wife is more willing to accept a lower price to get money quickly.

4. Ghosts and Superstition

In Singapore, home sellers and real estate agents are not required by law to reveal if a property was the scene of a gruesome murder. They also don’t need to disclose if the house is haunted or inhabited by something paranormal. Usually, these stigmatised properties are offered at lower prices and are hard to sell. Similarly, superstitious buyers shun inauspicious homes, like those near a cemetery or with bad Feng Shui.
Amid the transparent nature of Singapore’s property market, one of the riskiest things a seller or buyer can do is to determine the value of a home just by relying on gossip, rumours or hearsay without validating the price or performing due diligence.
By arming yourself with this powerful tool called property valuation, you can avoid falling into this trap, enabling you to make the most of your real estate investment.
Make use of PropertyGuru’s Property Price and Valuation tools for a rough estimate of your property’s valuation here.
For more property news, content and resources, check out PropertyGuru’s guides section.
Need help financing your latest property purchase? Let the mortgage experts at PropertyGuru Finance help you find the best deals.
Disclaimer: The information is provided for general information only. PropertyGuru Pte Ltd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

More FAQs related to property valuation:

You may consider hiring a real estate professional like valuers to assess your property’s market price and get a valuation report.

Take your property’s monthly market rent and multiply it by 12. You may also find the current annual value of your property by logging into IRAS here.

A good indication is to compare the prices of the properties in the area. The bigger the price gap, the likelihood of a property being undervalued is there.

If you are looking for a detailed valuation report from a licensed valuer, the fee involved can be from $600-1000, depending on property type.