Straits Times Forum: What determines market value of property?

What determines market value of property?

I REFER to Mr Patrick Tan's letter, 'Valuation the culprit in artificially inflating HDB flat prices' (June 17).

The market value of a property is the estimated amount for which it should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing where both parties acted knowledgably, prudently and without compulsion. It is not a situation of a willing buyer and an unwilling seller where the terms of purchase are favourable to the buyer. Nor is it a situation of an unwilling buyer and a willing seller where the terms of sale are favourable to the seller.

The transacted prices of comparable properties are generally the best evidence of the market value for standard properties like HDB flats. In the case of HDB flats, cash top-up is part of the price of the property sold and the transaction price is therefore a legitimate piece of evidence to rely on when valuing a property. The valuer's job is to interpret the market, not make the market. The market is the final arbiter of what is an appropriate valuation. It is neutral as to affordability issues. The market itself will eventually adjust downwards if buyers deem the cash top-up excessive and refrain from transacting.

Valuers have to examine the micro and macro factors of the particular segment of the real estate market, together with the economy sentiment. Such factors will include demand and supply of the various micro residential markets, and legislation and policies pertaining to the particular real estate segment.

Factors affecting the private and the HDB residential market may be slightly different, and thus the property market cycle of each real estate segment is never identical.

This also accounts for the difference in values of a property in different timeframes and different values for similar properties in different locations.

Janet Han (Ms)
Secretariat
Singapore Institute of Surveyors and Valuers