Property Valuation Methods in New Zealand
The New Zealand property market has undergone a dramatic change in the last 24 months due to the global financial crisis, which has impacted on the number of mortgagee sales throughout the country.
By all indications 2010 will be a significant year for the New Zealand residential property market, with the world recovering from one of the biggest recessions in history, consumer confidence only just starting to show signs of positivity and the New Zealand government hinting that it may introduce disincentives for property investment.
Recently the New Zealand government has made statements about how it plans to "crack down" on property investors who have for years taken advantage of generous tax advantages associated with investment property ownership.
Whether the disincentives be in the form of a Capital Gains Tax or a change to the current tax structure, either way it has caused existing owners to question their future direction and has also stifled new entrants joining the market until some sort of clarity is given on the subject.
All these factors will have some affect on how the industry continues into the future.
With lending institutes such as banks tightening their lending criteria, it would seem that up to date valuations will become more relevant in property transactions moving forward.
How these valuations are presented and what method they use will have an impact on how the value is calculated.
There are three basic valuation approaches used to value property.
The market date approach uses the sales of similar properties in the area.
The cost approach assesses the value of the land and the cost to construct the building.
Lastly the income or investment approach looks at the income earning potential of the property.
Each valuation approach uses very different means and methods of coming to a fair market value of a property and the suitability of each approach varies according to the circumstances.
More often than not, a combination of these approaches will be used by a valuer in order to determine the value of the property in question.
By all indications 2010 will be a significant year for the New Zealand residential property market, with the world recovering from one of the biggest recessions in history, consumer confidence only just starting to show signs of positivity and the New Zealand government hinting that it may introduce disincentives for property investment.
Recently the New Zealand government has made statements about how it plans to "crack down" on property investors who have for years taken advantage of generous tax advantages associated with investment property ownership.
Whether the disincentives be in the form of a Capital Gains Tax or a change to the current tax structure, either way it has caused existing owners to question their future direction and has also stifled new entrants joining the market until some sort of clarity is given on the subject.
All these factors will have some affect on how the industry continues into the future.
With lending institutes such as banks tightening their lending criteria, it would seem that up to date valuations will become more relevant in property transactions moving forward.
How these valuations are presented and what method they use will have an impact on how the value is calculated.
There are three basic valuation approaches used to value property.
The market date approach uses the sales of similar properties in the area.
The cost approach assesses the value of the land and the cost to construct the building.
Lastly the income or investment approach looks at the income earning potential of the property.
Each valuation approach uses very different means and methods of coming to a fair market value of a property and the suitability of each approach varies according to the circumstances.
More often than not, a combination of these approaches will be used by a valuer in order to determine the value of the property in question.
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