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Art or science, property valuers need more than just information

In the final part of a series on the real estate industry, Tracey Cook examines the work of property valuers.

GIVEN that investment in real estate is the biggest single financial commitment most of us will make, the accuracy of a property valuation is paramount.

Described by some as an artistic science and by others as a scientific art, the secrets of property valuation are not easy to pin down.

Glendinning and Associates, one of Perth’s biggest property valuation organisations, conducts around 100 valuations per day.

Partner Ross Sharp said the secret to property valuation was extensive information, mainly comprised of sales evidence and broad knowledge of the property market.

Mr Sharp said vital components of a property valuation included data from the Valuer General’s office, the firm’s own collated sales information and mapping information from the Department of Land Administration.

Despite this pool of information, however, property valuation is not a wholly precise process.

“Property valuation is subjective, it is not a science,” Mr Sharp said.

“You need to interpret the market and market demand, especially at the moment, with some areas seeing prices leap ahead.

“If you just relied on historical sales evidence prices wouldn’t move much; you have to be particularly mindful when the market is rising or the market is falling.”

Property valuers must undertake three years of university training and a further two years as a trainee valuer before receiving their legal qualifications, a valuer’s licence, from the Ministry of Fair Trading.

However, even armed with valuation knowledge and experience, properties that are unusual or appeal to a niche market can be difficult to determine.

Independent Valuers WA director Michael Chartres said when valuing certain types of property, knowledge of the industry the property related to was required.

He said that, with unusual or rare properties, it was necessary to get an understanding beyond the property and look at the current and future state of the related industry.

“If you were valuing an abattoir that slaughtered goats you would have to get a feel for the goat industry,” Mr Chartres said.

“Unless you know where the industry is heading it is difficult to get a value.

“You could run with the costs of constructing or developing the property but what if no-one is buying goat meat?”

Mr Chartres said the amount of data now available for valuers was the most significant development in his 30 years in the industry.

 “There is a lot more data available these days to valuers and it is available much faster,” he said.

Transparency was another issue that had come to prominence of late, particularly with regard to litigation.

Australian Property Institute State president John Sheridan said that, increasingly, valuation reports were open to be questioned.

Mr Sheridan said there were more grey areas in valuation than in the past, which made valuation more difficult.

“It is the consequence of issues like contamination, heritage listings, native titles over land,” he said.

“The more complex the valuation, the greater the need for transparency.”

Mr Sheridan warned property owners not to forget that a valuation is an opinion.

“There are quantitative tasks that are used to prove up your value, but at the end of the day it is the valuer’s opinion of the value,” he said.

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