A Guide To Property Valuation In Singapore

A Singapore property valuation is one of the most important things property owners, both aspiring and those with experience, should know.

Proper valuations remove the danger of being overcharged by a rogue seller for your investment property or dream home. Even when you are paying a premium for the property, a valuation will show you if it is worth it. It also sets the stage to get adequate financing from a lending institution. A valuation, basically, is an estimate of how much a property is worth. Here is the information you need.

Benefits Of Checking Your Property Valuation

There are five main benefits of property valuations.

1. It Impacts The Maximum Loan Amount You Can Get From The Bank

When it comes to residential property, banks only offer 75% of the purchase price or valuation, whichever is lower. For example, if you are looking to buy a condo at \$1.5 million and its valuation puts it at \$1.45, the maximum bank loan you can get is \$1,087,500. The bank does not consider the extra $50,000 for the condo.

This makes it difficult for HDB flat buyers. The HDB resale valuation is only done by HDB itself. And this is only done after you have agreed on the purchase price with the buyer and put down a deposit. If the property valuation turns out to be higher than the purchase price, you have to find other means to pay the difference. Keep in mind that you might need to do a fresh valuation when refinancing your home in the future.

2. Affects The Stamp Duties You Pay

Stamp duties, buyer’s stamp duty effected during a purchase, Singapore seller stamp duty effected during a sale, and additional buyer’s stamp duty, are calculated based on the asking price or property valuation, whichever is higher.    

Note that this can work against property buyers who are pushing for higher property valuation in order to get a higher loan amount from the bank. It will mean paying more stamp duties during the sale or purchase.

Here is an example of a buyer’s stamp duty. If the buying price of a home is $900,000 and a valuation puts the property at $950,000, the buyer’s stamp duty will be calculated using the valuation figure of $950,000.

The same case applies to additional buyer’s stamp duty. If the property has a buying price of \$850,000 and a valuation puts the home at \$800,000, the additional buyer’s stamp duty will be calculated using the buying price of \$850,000.

3. Can Be Used As Supporting Documents For Negotiations

Making a valuation of the property will give you an upper hand when negotiating the price of a property. Sellers know that selling a property at a price above its value is hard. And if you can produce the valuation papers, you can negotiate more successfully for your new home.

But one thing to keep in mind is that the valuation amount sets a limit in the negotiations. If the seller is seeking to sell quickly, they might sell it at the valuation price. There are hardly any sellers who will be willing to go below it.

4. Affects Your Future Return On Investment (ROI)

Every investor aims to buy low and sell high. Once you use your knowledge of the value of the property to negotiate the lowest price possible, you can upgrade and renovate the home to increase its value. This allows you to sell the said property at a higher price and make a juicy profit.

Having a valuation report as you sell will make it easier to help your potential buyer get loan approval. You will also sell fast since the valuation will convince the buyer that they are getting a fair price. And this eliminates the need to engage a property agent who will cost you part of the sale proceeds.

5. Affect The Bank You Choose To Get Financing

Sometimes, the cheapest loan is not always the best choice, especially if it means forking out lots of cash to top up the difference that the mortgage does not cover.  Banks that offer a higher interest rate are likely to accept a higher valuation. Banks with a low-interest rate, on the other hand, will stick to offering 75% of the lower of the purchase price and valuation.

Most property buyers and investors will find it easier to pay the higher interest over a few years than find funds to cover the difference.

3 Ways To Calculate Your Property Valuation

There are two types of property valuation Singapore:

1. Indicative valuation
2. Actual valuation or true valuation

The indicative valuation is a rough guess of the house valuation based on factors like the prices in the surrounding area and past transactions of similar properties. You can do it or have your property agent do it.

The actual valuation is an in-depth valuation done by a specialized third party. They will look at property-specific factors like the value of renovations and maintenance of different parts of the house. You can get a valuation of property in Singapore by carrying out an analysis using one of these three methods.

1. Income Method 

This is where a valuer uses estimates of the income stream from the property, such as rent, to determine its value. It is built on the foundation that any property is worth as much as the amount of income it can generate.

The income method is the best option when working with investment and commercial property. You can also use it for a residential property you plan on putting in the market for rent.

2. Residual Method

The residual method is also known as the cost method. The valuer uses the cost of the land and cost of construction, less depreciation, to estimate the worth of the property. It also takes into account data like the fees paid to the authorities and profit for the developer.

This is the best option when valuing properties with few or no market transactions. Some good examples of properties are schools and churches.

3. Comparison Method

This is also known as comparative market analysis. It is based on the Principle of Substitution, which states that the upper limit of the value of a property is established by the cost of acquiring an equally desirable substitute. This means that the maximum amount that smart investors would pay for a property would be no more than the amount it would cost to build or buy a similar property in the open market.

When using the comparison method the valuer will research the recent transactions in the location. They will then make an analysis based on a number of factors:

• Location
• Age
• Tenure
• Floor area
• Design and layout
• Condition of the property
• Date of transaction
• Current market conditions

How Do You Get A Valuation For Your Property

There are two main methods to get home valuation Singapore.

1. Past Transaction Prices

You can research the prices of similar properties that have been sold in the past to get the value of your property. In the case of an HDB flat, HDB’s Resale Flat Prices e-service in the HDB website provides an updated list of flat transactions in the last two years.

For Singapore private property, URA’s Private Residential property Transactions e-service provides a list of private residential property transactions within the last three years.

2. A Licensed Appraiser  

Once past property prices show the property has x value, the next step is to get an appraiser who will verify this with an in-depth assessment. Ensure that you only use licensed Singapore property valuers who are professionals in the field. It will give you a proper property valuation report.

If it’s private property, get a property valuer Singapore from the Singapore Institute of Surveyors and Valuers (SISV). In the case of an HDB flat valuation, you do not have to worry. HDB has a panel of appraisers that is professional and licensed by IRAS, such as Savills. You can also find companies that provide real estate advisory services. But research about the company first to ensure it can be trusted.

For instance, Savills is a reputable company. Besides being part of the panel that valuates HDB flats, Savills also works with private parties, property developers, REITs, and financial institutions. It offers a broad spectrum of services, such as due diligence, mergers, and acquisitions. If you have land or houses overseas, you can still work with Savills. Its experience is worldwide with offices in the UAE, Russia, Thailand, France, Romania, Malaysia, Germany, Ireland, China, New Zealand, South Africa, Italy, and a lot more. You can check the services and countries covered on the Savills website.

A website like SRX valuation also provides properties valuation done by professional and licensed property valuers, Singapore.

Conclusion

It is easy to focus on the common factors like the size of the property and forget other essential details that could affect Singapore property value. For example, in the case of apartments, the structure of the building, location of the unit, and its orientation could affect its value. The same case applies to changes in the infrastructure where the property is, such as the development of an MRT line or a shopping mall. Be sure to consider these factors.

If you want your property value[1] to be high, ensure that the property’s state of repair and maintenance is well-kept. This includes both the exteriors and interiors, such as the floorings, walls, and other fixtures. Be sure to read our guide on what you need to do after purchasing your property.

Get at least three different valuations, we recommend one to be Savills. Different valuers will give different valuation reports. But with three options, you can have a more accurate picture of the property’s value by using their average.