Property Valuation Malaysia: How Much Is Your Property Worth?
1.0 What is property valuation?
Property valuation, also known as real estate appraisal, is the process of determining the price tag or market value of a property. In other words, how much is your property worth?
Property valuation in Malaysia is a meticulous process executed by qualified professionals registered with the Board of Valuers, Appraisers, and Estate Agents & Property Managers (BOVAEP). These experts utilize a comprehensive range of factors to accurately determine the value of a property to provide reliable and informed property valuations that assist buyers, sellers, and investors in making well-informed decisions in the dynamic Malaysian real estate market.
2.0 Why would I need property valuation?
2.1 To obtain a home loan
Banks often require a property valuation when you apply for a home loan. This ensures that the property is worth enough to secure the loan.
When you apply for a home loan, the lender (bank) will need to assess the value of your property to ensure that it is worth enough to secure the loan. If the value of your property is less than the amount of the loan, the lender may require you to provide additional collateral, such as a savings account or a life insurance policy.
Example: The property is valued at RM300,000. You are applying for a home loan of RM500,000. If you cannot pay the RM500,000, the lender (bank) will not be able to recover the cost from the property itself due to the RM200,000 deficit. Hence, a property valuation is necessary to justify the property's value with the loan amount.
2.2 To obtain a home loan refinancing
If your property value has appreciated significantly since you took out your original loan, you may be able to refinance and unlock some of that equity. This could be great way to consolidate debt, make home improvements, or simply have some extra cash on hand.
A property valuation is required when you refinance your home loan, this is because lenders need to ensure that the value of your home is sufficient to cover the amount of the loan.
2.3 To sell your property for the best price
A property valuation can help you determine your property's asking price. This will help you to avoid underpricing or overpricing your property.
When selling your property, setting the asking price at a realistic and competitive level is essential. A property valuation can help you determine your property's fair market value, which will give you a better understanding of how much you can realistically expect to sell it for.
Example: You purchased a property in Malaysia five years ago for RM400,000. You want to sell it now, but you don't know how much to sell it for. This is where property valuation comes into play by helping you determine the right price to sell your house, so you can make an informed decision and set a fair price that aligns with the current market value of your property.
2.4 Make informed investment decisions
Similar to selling your property, if you are considering investing in property, a property valuation can help you to make an informed decision about whether or not to purchase a particular property.
Example: The seller’s asking price is RM600,000, but the property valuation determined the property’s value at RM400,000. This helps to ensure that you are not overpaying for the property and allow room for negotiations for a fair deal based on factual data.
2.5 Claim insurance for property damage
If your property is damaged by fire, flood, or other natural disaster, you may be able to claim insurance for the loss. However, the amount of your insurance claim will be based on the value of your property. Thus, property valuation will be necessary to determine the claim amount.
2.6 Assess the value of your property for tax purposes
The value of your property can affect your taxes in several ways, such as capital gains tax, inheritance tax, and stamp duty. A property valuation can help you determine your property's value for tax purposes.
3.0 What factors affect the value of a property?
3.1 Location
The location of a property is one of the most important factors that affect its value. Properties in desirable locations with good schools, amenities, and transportation are often more valuable than properties in less desirable locations.
Example: Kuala Lumpur has a higher median transacted price per square foot (PSF) of RM421 compared to Selangor, which has a median transacted PSF of RM343. This is because Kuala Lumpur is the nation's central business district with a well-developed transportation network and infrastructure. In comparison, some parts of Selangor is considered as a developing suburban area.
3.2 Property Size & Layout
The value of a property is influenced by its size and layout. Generally, properties with bigger layouts are considered more valuable than smaller ones due to their increased living space and more potential for personalization. However, it's important to note that the value of a property does not always rise proportionally with its size.
Example: A property in Kuala Lumpur measuring 1,000 sqft might be priced at RM1,500,000, whereas in Cyberjaya, you could find a property of 3,000 sqft for the same price.
3.3 Property Condition
The condition of a property also affects its value. Properties that are in good condition tend to be more valuable than properties that are in poor condition. Buyers often favor move-in ready homes, where well-maintained properties have minimal repair or renovation needs, thus commanding higher prices. The condition of a property includes factors such as the age of the property, the quality of the construction, and the level of maintenance.
Example: A ready-to-move-in property can be valued at RM500,000 compared to the property next to it, which is valued at RM400,000 but requires an estimated RM200,000 for renovation to move in.
3.4 Property Features
The features of a property can also affect its value. Properties with desirable features, such as a pool, high floor, or a view, tend to be more valuable than properties without these features.
3.5 Property Market Demand
The demand for property also affects its value. If there is a high demand for properties in a particular area, the value of those properties will tend to be higher.
3.6 Property Market Supply
The supply of properties in a particular area also affects its value. If there is a limited supply of properties in a particular area, the value of those properties will tend to be higher.
3.7 Current Economic factors
Economic factors, such as interest rates and inflation, can also affect the value of properties. When interest rates are low, more people will be capable to afford to buy homes, which can drive up property values. When inflation is high, the cost of living increases, which can also drive up property values. You can read an actual sample of this factor here.
4.0 Property Valuation Process in Malaysia
When you apply for a home loan in Malaysia, the bank will conduct an independent valuation of the property you intend to buy. This ensures that the loan amount is not more than the property's market value.
The valuation process is carried out by a qualified property valuer registered with the Malaysia Board of Valuers, Appraisers, Estate Agents, and Property Managers (BOVAEP). The valuer will consider several factors when determining the value of the property, including:
Location
Property Size & Layout
Property Condition
Property Features
Property Market Demand
Property Market Supply
Current Economic factors
Once the valuer has completed the valuation, they will submit a valuation report to the bank. The valuation report will include the property's value and the assumptions and methodology used to determine the value.
The bank will then use the valuation report to determine the home loan amount they are willing to offer you. It is important to note that the home loan amount will not be more than the property's market value.
Example: For a property worth RM500,000, you can easily get a bank loan of RM300,000. However, getting a bank loan of RM500,000 for a property valued at RM300,000 will be difficult.
5.0 Property Valuation Methods in Malaysia
5.1 Comparison method
The comparison method, also known as the market data approach or sales comparison approach, is the most popular method for property valuation. It is based on the principle that the value of a property is determined by the price tags of similar properties that have recently been sold.
The comparison method is a relatively simple and straightforward method for property valuation by providing real-time market insights and allowing you to gauge the competitiveness of your property's pricing.
5.2 Residual method
The residual method is a valuation method used by property developers to determine the value of a development site. It is based on the principle that the value of a development site is equal to the gross development value (GDV) minus the total cost of development.
The GDV is the estimated market value of the completed development. It is calculated by adding together the estimated selling prices of the individual units in the development and the estimated value of any common areas or amenities.
For example, if the GDV of a development site is estimated to be RM100 million and the total cost of development is estimated to be RM80 million, then the residual value of the site would be RM20 million.
5.3 Discounted cash flow (DCF)
Discounted cash flow (DCF) valuation is a method of valuing income-generating properties that take into account the future cash flows that the property is likely to generate. The property's value is determined by discounting the future cash flows to the present day using a discount rate that reflects the risk of the investment.
5.4 Investment method
Also known as the income capitalization approach, this method is similar to the profit method, which evaluates a property's value based on its income potential for investors.
The income capitalization approach involves estimating the property's net operating income (NOI) and dividing the NOI by a capitalization rate (CR). The CR is a measure of the riskiness of the investment and is typically expressed as a percentage.
The formula for the income capitalization approach is as follows:
Value = NOI / CR
Value = RM50,000 / 10% = RM500,000
For example, a property generates an NOI of RM50,000 per year, and the CR for similar properties in the area is 10%. This means that the property is worth RM500,000 based on the income it will likely generate.
6.0 Property Valuation Fees in Malaysia
The Seventh Schedule of the Valuers, Appraisers, and Estate Agent Rules of 1986 regulates the fees charged by licensed property valuers in Malaysia. The property buyer typically shoulders the fees.
The fees are calculated based on the property's market value. The following is a table of the fees:
| Market Value | Fee |
|---|---|
| First RM100,000 | 0.25% |
| Next RM2 million | 0.20% |
| Next RM7 million | 0.167% |
| Next RM15 million | 0.125% |
| Next RM50 million | 0.10% |
| Next RM200 million | 0.067% |
| Next RM500 million | 0.05% |
| Amount in excess of RM 500 million | 0.04% |
7.0 How do I conduct property valuation myself in Malaysia?
Unfortunately, no dependable online tool is available for Malaysian residential properties that can perform comprehensive calculations for property valuation.
However, there are alternative methods you can employ to make informed decisions when buying or selling a property. One way to do this is to use transaction data. Transaction data is a record of all the properties that have been sold in a particular area. This data can be used to gauge the right price to buy or sell a property. Here are two platforms you can use to access transaction data:
This is where you can discover actual transacted property prices In Malaysia, and using it is very simple. Just type in Streets, Areas/Towns, or Projects/Townships, and you’re good to go! You’ll get more detailed info and an overview of the Median Price and Median Psf.
Similar to brickz.my, with additional info such as YoY change and lower to upper price ranges.
Disclaimer: The following information is provided solely for general knowledge. DWG Malaysia Sdn Bhd assumes no responsibility or liability for the information's accuracy, adequacy, or reliability. This includes any warranties or representations regarding the suitability of the information for any specific purpose to the maximum extent allowed by law. While every reasonable effort has been made to ensure the information's accuracy, reliability, and completeness at the time of writing, it should not be solely relied upon for making financial, investment, real estate, or legal decisions. It is strongly recommended to seek advice from a qualified professional who can consider your individual circumstances and provide personalized guidance. DWG Malaysia Sdn Bhd disclaims all liability for any actions taken based on the information provided.
