elements under the national standard are:
outcomes of analysis
data on subject property
value, analytical approaches used and qualifications required.
OUTCOMES OF ANALYSIS
can be considered as consisting of two parts:
(the "D" factor)
(the "U" factor).
breakup is shown in the attached diagrams against common land uses:
diagram showing high "u"
diagram showing high "d"
amount or ratio of desirability determines the method of valuation
to utility in the total value. There are 3 fundamental methods of
number of overseas textbooks list other methods, however they can be
included under one of the above headings. For example, cost and
residual methods come under the summation method in Australian
THE METHOD OF VALUATION
the direct comparison method is not suitable then either the
summation or the capitalization method is used. Which one?
desirability is the major eleme
nt then the summation method is used.
However, if utility is the major element, the capitalization method
is used. Generally, the appropriate methods are as follows:
this part we are concerned with the direct and summation methods.
single residential house: summation
home unit in a strata scheme where the majority are owner occupied: direct comparison.
home unit in a strata scheme where the majority are leased out as
investment properties: capitalisation.
properties such as retail, commercial and industrial: capitalization.
primary and secondary methods
DATA ON THE SUBJECT PROPERTY
of value are useful tables or graphs constructed from sale evidence
for the important variables determining market value for example, age
(architectural style), materials, condition, and size.
analyzing sales with the summation method the value/m2 of the
improvements against vintage is found. The values/m2 are plotted on a
graph for the subject house, in good order, with standard materials
and standard area. Such a graph is shown in the diagram below. The
value for an age other than that revealed by sales can be
interpolated from the graph.
AGE VERSUS VALUE
diagram below shows a scale of values for brick/tile, wood/tile, and
wood/galvanized steel houses in which area, age and condition are
held constant. Values for vintage/materials not revealed by the sales
can be interpolated.
CONSTRUCTION MATERIALS VERSUS VALUE
diagram below shows a scale of values for very good order (VGO), good
order (G0), needs paint and repairs (NPR), and poor order (PO)
conditions. Materials, age and area are held constant.
CONDITION VERSUS VALUE
diagram below shows a scale of values for houses of 50,100, 200, and
400m2. Condition, age and materials are held constant. The value/m2
falls with an increase in area as fixed costs and expensive "one
of'" features (such as kitchens and bathrooms) are averaged over
a larger area.
multiple regression analysis
THE VALUE OF BUILDINGS
the most important variables that determine the value of residential
- see above
improvements - see above
age of the building should be stated as vintage (year built) rather
than "x" years old. This Is because "x" years old
is relative to the date of the valuation report and therefore,
requires knowledge of that date. Further, it is more difficult for
the valuer to know and relate the date of construction with the style
and architecture of historical periods.
the table in the appendix that shows, as a general guide, the age
of buildings by the materials used.
of buildings against materials used
style can be one of the most important variables of the market value
of houses particularly, in heritage areas. It is an example of "art'
being an important part of valuation system. Residential houses
should be classified and dated according to architectural periods for
example, art nouveau, art deco, modern, Californian Japanese, and
West Cost Bungalow. This is more important than the year of
of housing have changing attitudes to architectural style and an
unpopular style today may be popular tomorrow.
terraces in Sydney were particularly unpopular in the early 1900s
when it was considered desirable that houses should be freestanding.
Compare this attitude with their popularity today.
of this nature should be constructed to suit a certain locality. For
example, what may be a good classification for the North Shore of
Sydney may be a poor classification for the inner suburbs of Sydney.
houses were constructed during distinct chronological periods, such
as the "immediate post war" period or the "depression
period". Subdivision of houses into historical periods is useful
as it reduces the number of categories needed and groups houses
together into similar design, architecture and materials.
appendix for a breakdown of architectural styles together with circa
based on that used by the South Australian Valuer General.
commonly used classification of a building's condition and a useful
fieldbook code is as follows:
VALUE ONLY (dvo):
building has no value
minor structural improvement.
PAINT AND REPAIRS (npr):
and non structural repairs are required.
condition but will require painting soon.
painted and/or renovated
average maintenance and condition. For example, well kept by one
relates to curable obsolescence until it falls to the level of
demolition value only. At that stage, it becomes incurably
obsolescent and the building has no value. Incurability reflects the
cost to cure. If substantial problems arise with the structural
integrity of the building (for example with the footings), although
cure is possible, it is too costly and the owner would be better off
demolishing and rebuilding.
describes the extent and quality of items, workmanship, and attention
to detail in the house. It is measure of the quality of construction
(for example, Tallowwood, Tasmanian oak or Jarrah floors) as well as
the number and quality of prime cost (pc) items.
items are those fixtures which are included at cost by the builder.
That is, in the building contract they are not separately costed as
the actual cost is not determined until date of purchase. This also
allows the owner some flexibility in the type, quality and extent of
PC items to be included in the house.
sink and laundry tub.
valuer can usually determine finish by the attention to detail. For
example, there is a rule of thumb that state; "if the front door
knob is expensive, then the finish for the rest of the house is also
of a high standard".
structure of the house relates to the relative cost of construction
of the structural parts. The parts in descending order of value and a
popular code is as follows:
main part of building under a full roof, fully lined and ceiled.
flat roofed addition (lean to) to the main part of the house. It may
or may not be fully lined and ceiled.
open structure attached to the house. Generally, not lined and
outside concrete slab attached to the building.
effective or equivalent area
value is determined using the direct comparison method as shown above
or by analyzing the value from sales of houses using the summation
method. The main component of land value is whether or not a house
can be built on the land. Therefore, the extra or marginal value of
land over and above that value is less per square metre than the
basic building block.
affecting land value includes:
eg a northerly aspect
or corner block
side or low side of the the road
of the road and access to the block.
analyzing values with the summation method
replacement cost new (RCN) method