1. Define in your own words, the term “market value”.
2. Briefly outline the impact the economic climate has on the values of property.
3. What is the role of the agent in providing property appraisals to potential vendors?
4. Explain in your own words, how political forces, such as low interest rates or first
home buyers grants could effect values of property in the bottom end of the market.
5. Explain how proximity to amenities can affect value, both positively and negatively.
6. What does “topography” refer to?
7. What does “highest and best use” mean?
8. What is Land “Tenure”?
9. What is “physical deterioration” and why does it affect the value of property?
10. Think about the property you are currently occupying. List:
a) The things you think could be done to improve its value
b) The things you feel that currently stifle value. E.g. A long way from public
transport, main road location etc.
What is `Market Value’?
Concept and Definition of Market Value
Market value can be defined as meaning the amount that a willing buyer of an asset could reasonably be expected to pay to acquire the asset from a willing seller. The concept of market value in real estate is based on the idea of comparing like properties to determine the level of value which is determined by buyers and sellers in the marketplace. The market value refers to the money that could be reasonably exchanged for a good or service at the
current time. As the world constantly changes, so does the market value of goods and services.
Spencer Case Definition of Market Value
The High Court of Australia, in the 1907 Spencer v Commonwealth case defined market value. ‘The value of land at a certain date is the amount of money the land would bring on the open market by voluntary bargaining between informed vendor and informed buyer both willing to trade but neither so anxious to do so as to overlook any ordinary consideration.’
In other words, the High Court deemed market value to be a `fair’ price. International Assets Valuation Standards Committee Definition The International Valuation Standards Committee (IVSC) is a non government organisation
member of the United Nations and works cooperatively with United Nations members, many organisations including the World Bank and valuation societies around the world. The aim of IVSC is to harmonise and promote agreement and understanding of valuation standards.
Under the IVSC Standards, market value is defined.
`Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.’
What Forces Create Value?
Many external factors affect the value of property. They include:
The demographic make-up (the age, education, ethnicity, marital status, income, family size, occupation, and personal or household characteristics) of the local community can affect the value of a property in a particular area.
The facilities and amenities available within a geographic area can also impact on the value of property, for example, community centres, shopping centres, transport, schools, parks, churches, child care centres and entertainment venues.
Both the Australian and global economies can significantly impact on the value of property. The value of the Australian dollar, imports, exports, and trade deficit all have an impact on the price of goods and services. Consumer confidence and the level of interest rates have a direct impact on the property market. When low interest rates prevail, property value may boom – attracting more investors to the market. When interest rates are high, the value of an investment property may not be so
Federal, state and local politics often play a role in changing property values. Many laws are in place that regulate the use and development of land. Government imposes certain criteria for the granting of planning permits. Other laws govern building approvals regarding structural matters and compliance with the building regulations.
The construction, condition, size, aesthetics and location are the most recognisable factors that affect property value. Other physical factors that impact on value include style, garden condition, interior decorating, quality of chattels and fixtures. These are all items that can be easily compared to other properties in the area.
What Does an Agent Provide?
One of the most important services an agent can provide is an estimate of the selling price of a property. In doing this, an agent must be constantly aware of the legal and ethical obligations that govern the industry.
Agents have a duty to provide accurate information and to act honestly and fairly when
dealing with the public.