Six Factors Influencing Property Valuation in Malaysia 

One of the most common challenges that consumers have when intending to sell their house is establishing the selling price. As a result, customers are less likely to follow through on their selling decisions because they are concerned about underselling their property.

Performing a property valuation check in Malaysia is not an easy task, especially for first-time homebuyers. However, estimating the value of your home is the first step in attracting prospective buyers who are interested in what you have to offer.

What is property valuation?

Property valuation is the process of determining the current worth of real estate by an independent and unbiased professional based on the asset’s location, condition, and various other factors.

In Malaysia, property valuation is conducted by professionals registered with the Board of Valuers, Appraisers, and Estate Agents and Property Managers (BOVAEP). These professionals are given such power under the Valuers, Appraisers, and Estate Agent Rules of 1986. The property valuation report produced by these professionals can be relied on for legal matters (i.e., it can be used in court).

Factors that affect property value

1. General economic trends

People will be more inclined to spend more during an economic boom and be more likely to purchase homes during these periods, which will certainly drive up prices.As a result, it would not be unreasonable to ask for a higher price, especially if you have received a high valuation.

2. Location of property 

If your property is located in a neighbourhood that is well connected, with a variety of buses and trains that serve the area, or is a stone’s throw away from major central landmarks, offices, and buildings of public interest, this can make a property highly valuable and attractive in the eyes of many interested buyers.

3. Conditions of general property market

Another factor to examine is the property market’s demand and supply patterns. Check to see if buyers favour houses in your community over those in neighbouring neighborhoods.

However, if practically every other house in the neighbourhood where your property is located goes on the market at the same time, you will have a more difficult time convincing potential buyers why yours is superior.

4. General demographics

If the majority of the people occupying your neighbourhood are foreigners, they may be interested in smaller, more compact high-rises that are part of a larger community and have multiple tiers of security.

On the other hand, if your area is populated with young professionals and growing families, then prospective purchasers may prefer larger homes to accommodate more people.

5. The property itself

A larger home with more floor space will be worth more than a smaller one in the same community. Furthermore, if the property includes amenities such as gated and guarded security, a swimming pool, a gymnasium, and others, buyers may be more eager to purchase the home in order to take advantage of those benefits.

Furthermore, whether the property is freehold or leasehold can influence customers’ purchasing decisions. While a freehold property owner normally owns a property for a lifetime, a leasehold property owner may only possess a property for 99 years and may be required to return the land to the government or pay a fee to prolong the leasehold land tenure.

6. Recent renovations 

If you have recently made changes to your property, particularly major ones like upgrading flooring materials or erecting a partition in one portion of the house to create more private rooms, the property’s valuation will be affected, as even minor improvements to improve and the overall quality of the property for future owners will result in a higher valuation for the property.

While there is no way to determine which valuation approach will be favoured by those in charge of the valuation process, here are a few that are widely used:

Direct comparison method: In this relatively straightforward method, a property is valued by comparing it to the valuation of similar properties in the open market. The pricing of the property in question would not exceed the maximum amount that a prospective buyer is willing to pay for these similar properties.

Discounted cash flow: Via this method, a property is valued based on the discounted price of the future income it is likely to generate. Estimated amounts of future cash flows are calculated, then discounted using a special rate that is equal to the returns in investment you would receive from a similar property.

Residual method: The residual method is used to find out the potential amount of money that a piece of property or land would fetch if it were to be redeveloped. The residual value of the property/land in question is the amount it would be worth after completion of redevelopment and deducting the costs associated with refurbishing it.