Key points of financial essentials
‘Property’ is a term used to describe a legal real property interest in real estate. In economic terms a property can have a value-in-use and a value-inexchange, the latter is an estimate of exchange price.
A property valuation is the process of forming an opinion of value-inexchange under certain assumptions and a market valuation requires those assumptions to establish an open market scenario.
Valuations are required in connection with many activities, chiefly development appraisal, transfer of ownership, monitoring of property investment performance, reporting the value of property assets held by companies, loan security, tax matters and insurance risk assessment.
The diversity of property makes valuation a difficult task, no two properties are ever the same, yet valuation relies on the comparison of properties to give an indication of value. To do this the valuer must be aware of, and be able to quantify, differences in type, location, legal interest, quality and the state of the market.