ETM 3409 Intro To Valuation : The Property Market

The Property Market

What is Property Market

Value & Valuation
MARKET PRICE
a price obtained for a specific property under s specific transaction
a historical fact during the transaction that cannot be changed later
may or may not represent the property market value
may or may not the indicator of the property market value

MARKET PRICE  MARKET VALUE

In real estate valuation, it is important to distinguish between market value and market price.

Market price differs from market value as market price is a historical fact during the transaction that cannot be changed later. On the other hand market value is an ever changing and fluid concept.

Situation where market price differs from market value:-

Family relationship can help the buyer to pay less than the market value.

A transaction can be a part of a bigger consignment which can lead to a price cut.

People can pay more than the market value if that makes his own industry earn some special privileges (mergers, take-overs etc.).

FACTOR AFFECTING PROPERTY VALUE
Geogrpahy and Location are important elements affect a property value. Geography includes geology, topography and climate. Location can increase property value in terms of accessibility, availability of facilities and amenities, thriving area, business hub and etc.
Tenure - freehold vs. leasehold. Freehold property reflects a better value.
Demographics Pattern – consideration given to household income, population structure, age, races, level of education and etc. Increase in population caused demand on property particularly residential property.


Physical (Design) features include architectural details, space and design, the building age and material use.
Condition and State of Repair  The good condition and state of repair of a building generates good price whilst bad condition and state of repairs depreciate the value. The availability and provision of services within the building will also affects the property value.
Potential for development. Development potential in a vacant land will affects its value. In the existing development, potential for extension, renovation, reuse and redevelopment will affects value.


Neigbourhood. Trendy areas, locations and neighbourhood circumstances in terms of public services and amenities, the presence of open spaces and parks, the existence and proximity to shops, schools, places of worship, as well as the possibility future development can increase price level.
International economic situation - International economic and financial situation had an important effect on property market worldwide. International events and recession, which may destablised economies worldwide, affects     the demand for property by would-be user


The national and local economic condition (demand and supply factors) - Poor performance in national and local economic conditions affect the demand and market values of a property. Encouraging economic conditions and high economics activity fuelled the demand for properties. Local employment will also affect demand for property.
Communication & accessibility - The existence of good communication and     accessibility have always been important in     influencing the value of a property. It is an advantage to be closed to good means of  communication


Feng Shui - Feng Shui is an oriental art concerned with the orientation of building and space. This complex art  explain how the environment affects our lives that may psychologically give impacts on property values.

Demand & Supply
FACTORS AFFECT DEMAND FOR AND SUPPLY OF PROPERTY

 Property Characteristics
~ Location - relates to accessibility, convenience, amenity and neighbourhood. A good and well-planned location will enjoy premium prices.
~ Product design - covers various aspects of product presentation and appearance such as basic features, building facilities and outdoor     facilities. An attractive presentation and     appearance match with buyers’ taste     encourage demand.


Property Price
~ Law of Demand rules - the higher the price, lower the demand and vise-versa.
~ Law of Supply rules - the higher the price of a particular product, the higher amount of supply and vise-versa.
~ Level of price determine buyers affordability. Over price property makes it less affordable and difficult to secure demand.


Economics factors
~ Disposable income - relates to consumption affordability which is the bottom line of purchase decision. Improving affordability contribute to higher demand for property.
~ Interest rates - Low interest rates signify an overall healthy economy helps to boost the property demand. High interest rate will increase loan repayment and thus, lower the demand for properties

~ Loan facilities - margin/level of financing     has a great impact on demand for property. Higher amount of loans available will stimulate higher demand for and supply of properties
~ Gross Domestic Product (GDP) - GDP corresponds to demand for and supply of property products. The higher GDP, the higher demand or supply
~ Consumer Price Index (CPI) - to indicate the state of inflation. Lower inflation create a strong demand, higher inflation reduce demand.
    ~ Availabilty of savings - increase disposable isavings induce increase in demand and subsequently increase in supply.

~ Capital gains & rental - level of capital gain     and rental above monthly loan repayment     influence the demand for property.
Government Regulation & intervention -
~ Government intervention and actions influence the demand for property for example the control of low cost house price.
~Tightened the property financing and transaction procedures or policies to curb speculation   
    ~ Government regulations drag the process of project approval become a major barrier to responsive supply system


~ Quota for low cost units, bumiputra quota, ceiling price requirements for low cost units can adversely affect property marketability.
Technology development
~ Technology advancement effects the ability to increase the supply
~ Technological improvement reduces the costs and time of construction

Changes in fashion and taste relates to consumers behavior.
Demographic factors - Demographic pattern, population size, age group, education, number of household and labour force are significant effects on market segmentation and the fluctuation in housing prices.
Property cycle consist of boom, decline, bottom (slump) and recovery. The demand and supply of property will be influenced by the cycle.      At ‘Boom’ the demand is higher whereas the property will be at oversupplied at ‘bottom’ cycle