Property valuation is the process of determining a property’s current value.
Whether you’re buying, selling, investing, or securing finance. An accurate valuation is essential for making informed decisions.
VALUATION METHODS
Valuations vary based on the property type and purpose. Here are the main approaches that your Valuer will be likely to adopt depending on the objective:
THE COMPARATIVE METHOD
This is the most common form of valuation and is used for residential properties, this method compares recent sales of similar property nearby. It considers size, location, characteristic, condition, tenure to estimate the value.
THE INCOME APPROACH
This is ideal for rental or investment properties, this method assesses value based on expected rental income, operating costs, and a capitalisation rate to determine potential returns. This is more complex than your average valuation given the elements that form part of the calculation.
THE PROFITS METHOD
This approach is applied to income producing businesses, such as hotels, short let blocks, or care homes. This approach will see the valuer, value a property based on business profitability after expenses.
THE RESIDUAL METHOD
This approach is suited for development sites. The technique estimates the end value of a property and subtracts development and construction costs to find land value.
THE COST APPROACH
This approach is the preferred for unique properties, it calculates the cost to rebuild the property today, minus depreciation, and adds land value. This is only used when there aren’t any comparable data for the valuer to assess as part of their valuation.
WHEN ARE VALUATIONS REQUIRED?
Valuations serve many purposes, including:
- Market Value: To determine a fair sale or purchase price.
- Insurance Value: To estimate rebuilding costs for coverage.
- Investment Value: To assess expected returns for investors.
- HMRC Purposes: To provide accurate data for taxation requirements.
- Rental Value: To determine a fair rental price.
WHICH VALUATION IS RIGHT FOR MY PROPERTY?
Each valuation method suits specific scenarios. The valuer will be able to discuss the most applicable approach for the property. The selected method will ensure you are given the all-important input to make a sound decision. Whether that be, property purchase, sale, refinancing, rental or investment.
Who completes the Property Valuation?
The property valuation must be carried out by surveyors who belong to one of the membership categories of the Royal Institution of Chartered Surveyors (RICS), including:
- Fellows (FRICS)
- Members (MRICS)
- Associate Members (AssocRICS)
In addition, the surveyor must be an active participant in the RICS Valuation Registration Scheme.
We have a full price list for our Valuations available on our Valuation page.
