ASPECTS OF LAND VALUATION

AUP 3161
(3 CREDIT HOURS)
Lecture 1: Introduction to Land Valuation
INTRODUCTION
PURPOSE OF THE SUBJECT
TO TEACH THE STUDENTS ABOUT THE CONCEPT,
PROCESS, TECHNIQUE AND METHOD OF VALUATION
IN LAND.
The course outline consist of
 the concept and purpose of valuation
Valuation process,
Land property concept,
Concept of value, price and cost,
Land valuation methods and techniques
Concept of compensation and compensation principles
Course objectives
To introduce the basic concept of land and property.
To provide the basic concepts of land valuation aspect,
valuation technique and property management
To explain land property concept, land interest and
land aspect in Islam
To relate land valuation and property management
with planning
Lecture 1
Introduction
Definitions of valuation
Concept of valuation
Purpose of valuation
Valuation process
Introduction
Real estate appraisal, property valuation or land valuation is the practice
of developing an opinion of the value of real property, usually its Market Value.
Market value as "the estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller in an arm’s-
length transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently, and without compulsion.“ (International Valuation
Standard - IVS 1 - Market Value Basis of Valuation, Seventh Edition)
No two properties are identical, and all properties differ from each other in their
location - which is one of the most important determinants of their value.
 So there cannot exist a centralised (one standard) setting for the trading of
property assets, as there exists for trade in corporate stock. The absence of a
market-based pricing mechanism determines the need for an expert
appraisal/valuation of real estate/property.
Definition
Definition of real estate / property valuation –
Science of estimating the value of land interest on
property for a specific purposes
Value in real estate valuation refers to “ market value” –
the market value of land may be roughly describe as the
price that an owner willing and not obliged to sell might
reasonably expect to obtain from a willing purchaser- no
compulsion on either the owner or buyer to enter into
the transaction and where both parties are aware of the
market consideration.
Market Value is not exact science, but based on several
assumptions and factors.
 Value is subject to seller and buyer's perception and
interpretation of parameters that they decide to take
into consideration, while other people usually refer to
their very own perceptions and interpretations of what
those people think is important.
Valuation report will contain information and analysis
of the facts and data needed for any valuation
Location, location, location
Local, regional, national, international?
 Considering that Market Price is what people agree to pay for something at a given
moment at a given place, it is important to underline the importance of the time and
place range wherein sellers and buyers meet.
The Local and Instant Market Value of a specific item is exactly the same as the Local
Market Price.
And if several people want the same thing while there is not enough for everybody that
wants it, Market Value and Market Price are identical.
 It is wrong to state that things have any stand-alone value, because value depends upon
transactions.
 No transaction means zero value, whatever value estimation or selling price
expectation.
 When a lot of popular items in a place is almost sold out, sometimes people are willing
to pay more than the asking price rather than spend time and effort to get it cheaper
elsewhere.
Is the paid price then Market Value or Market Price? Both.
The property valuation process
1. Identify property under valuation (identify
tenure/size/physical characteristic/market etc)
2. Identify factors influencing the value
(federal/state/local and social)
3. Data collection & analysis
4. Quantification of values (calculation and valuation
techniques)
5. Opinion of value (estimation)
Purpose of land valuation
Selling property
Apply for housing loan and mortgage
Rental purposes
Taxation
Investment and development
 Factors influencing valuation
According to Mohd Harith (1993), property value can be influenced by these factors:
 duration of time and ownership:- this refers to the condition of ownership i.e.
duration of time, category of land use, restriction of interest;
 legal factors:- this refers to all the legal measures issued by the government to
control property development and ownership such as National Land Code (NLC),
Town and Country Planning Act, etc.
physical attributes-: this refers to the land area, location, shape, finishes and
neighbourhood; and
economic condition-: this refers to the aspects that can affect the demand and
supply of property for example borrowing rates.
Three main factors affecting property values are;
external factors:- location, neighbourhood and accessibility;
integral factors:- physical conditions of land and building, and legal restraints; and
 economic conditions:- national and local economic outlook.
Factors influencing valuation
Mohd Hafiz (1994) has put forward ten factors that
can influence residential property value.
 date of transaction;
 location, location, location;
 "Fung Sui" - this is a custom belief;
 position of lot;
 floor finishes;
Physical condition i.e. deterioration;
landscape; and
building extension and renovation.
Azhari et.al (1992) has come out with a more detailed lists.
23 factors are identified, namely;
 date of the last transaction in the  kitchen extension;
area;  number of bathroom;
 land area;
 number of toilet;
 nature of transaction;
 kitchen cabinet;
 interest in property;
 gross floor area, building
 accessibility and neighbourhood
condition; extension;
 porch area;  closed extension;
 type of flooring  opened extension;
 type of fencing;  physical improvements; and
 type of air-well;  state of repairs
 type of lot;  Landscape
 number of bedrooms  Types of neighbourhood, gated,
 separate bathroom & toilet for guarded etc
master bedroom;  THE END FOR THIS WEEK
NEXT WEEK –LECTURE 2
UNDERSTANDING LAND PROPERTY CONCEPT
DEFINITION OF LAND AND OWNERSHIP
CHARACTERISTICS AND TYPES OF LAND
PROPERTY