Prestige Property Valuation

Valuation of Prestige Properties

A brief summary of the key tips & tricks involved in valuing prestige properties.

The valuation of prestige property poses a multitude of challenges for valuers as they are a specialised asset class. The most common issues faced include a paucity of sales, wide variances in sales evidence, and the challenge of correctly assessing the factors that influence the value. Whilst prestige property valuation must account for the ‘fundamentals’ that apply to all residential properties, such as land size, internal area, construction and location, there are additional aspects which must be considered by valuers as they can significantly impact value. Location & Position A purchaser in the prestige property market will often pay a premium or discount for the property’s location, thus making it an important consideration when selecting sales evidence and analysing sales. A premium or discount can be paid for desirable or undesirable positioning on a street or within a suburb, and valuers must take care to only select sales that are within close proximity of the subject. There is often a wide variance between prestige comparable sales, and one of the best ways of narrowing these gaps and accurately defining a range is selecting evidence that is located comparably to the subject.

Views Where a property enjoys water views or an ‘iconic’ view, it is necessary to select comparable sales evidence with the same views. Not all water or ‘iconic’ views are considered the same, as certain views may be preferred by the market and a discount may be applied for interrupted views. Furthermore, the likelihood of those views being lost or interrupted must also be considered and factored into the value. A valuer should make thorough investigations into the likelihood of any proposed development impacting the views and where it is deemed necessary, should apply an appropriate discount factor to account for this risk.

Desirability & Market Perception When determining the value of a prestige residential property, the desirability and market perception of the property must be considered by the valuer. This involves assessing the market for the property, and whether it has “wide” or “niche” appeal. Whilst this will be reflected in the value chosen, some commentary about this should be included in the report and qualified with evidence, where it is available. Valuers often have a tendency of including information relating to general economic conditions and attempting to factor this into their assessment of the market for a property, but this is inadvisable, and it is commonly accepted that the best evidence of market movements is from transactions in the market itself.

Design, Quality & ‘WowFactor’ Key aspects such as presentation, design and quality should all be factored into the assessment of value, as well as the usual valuation fundamentals. For instance, a quality architect-designed home with custom finishes will attract a premium when compared to a standard project home in a comparable location and with comparable views. The prestige market exhibits a tendency towards preferring luxury features, and a readiness to pay a higher price for grandeur. Other important features that must be considered include privacy, floor layout and presentation. Whilst these differences between properties may not always be initially obvious, it is important that valuers take the same to look at the details of sales, and assess how ‘wow-factor’, design and quality influence the value of the subject. An important issue to look for is whether the subject matches the features of other properties in the market, as a premium or discount may have to be applied accordingly.

Conclusion &

Recommendations Prestige properties are a specialised area of valuation, and as there is often a wide variance in the prices paid within this market, they pose a challenge to valuers. Whilst valuers must ensure they account for residential valuation fundamentals, they must also ensure that their sales evidence takes into consideration the salient features paid in the prestige market. The notion of the hypothetical seller and purchaser is especially relevant for valuers approaching these valuations, and the hypothetical market must be correctly envisaged to accurately assess values.