Real Estate Matters | Want to know how much your property is worth?

Sam Lee

Sam Lee is a marketing manager and property consultant at JML Property.  JML was established in 1994 and offers Investment Property & Homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.

There are many situations where you might need to know how much your property is worth, including financing, sales listing, investment analysis, property insurance and taxation. Or you might have owned the property for a while, and just want to know what it might be worth now!

Fundamentally speaking, there are many things that affect the value of a property such as demand, utility and scarcity. Macroeconomic, political, and demographic factors are taken into consideration as well.

However, each property is unique, and real estate valuations are inevitably a mixture between science and art. It’s wise to remember that ultimately, ‘value’ is in the eye of the beholder.

There are various appraisal methods, and which one you use largely depends on what kind of property you are appraising.

The first and perhaps the most familiar and common approach is the ‘Sales Comparison Approach’. In this approach, you simply take your property and compare it against other sold properties that are as similar to yours as possible. For example, if you own an ‘F Unit’ apartment in Manhattan, you would look for examples of other F Units in similar conditions that have sold within the last year.

Some properties, such as the white houses along Hac Sa beach, might not have recent transactions to benchmark against. This can make the sales comparison method a bit tricky at times.

In Macau, if you are looking to take out a mortgage to purchase a property or want to refinance an existing property, the banks will give you a bank valuation. While this valuation can be useful as a point of reference, it must be noted that this is different from the market value of the property. The bank valuation is simply the value at which the bank is ready to loan you money on and will most likely be quite conservative. This valuation depends on the individual risk tolerance and preferences of the bank, so if you take the same property to 5 banks, you’ll get 5 different numbers.

To get a market valuation, it’s better to consult a property agent who is active in that market. However, some agents will give you a slightly inflated number in order to create a ‘cushion’ for negotiations with the buyer. The final sales price will most likely be somewhere between the bank valuation and what the agent initially says your property is worth.

The second, and less common approach to appraisals is the ‘Income Capitalization Approach’. This approach is more commonly used for commercial properties or large income-producing residential properties and deduces the fair market value of the property from how much net income it produces.

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