Inspection And Valuation Of Residential Property Essay.

The purpose of the assignment is to carry out an inspection and valuation of a residential property. The basic format of this assignment and report also forms the basis for other valuation based units in the degree / major / minor you are undertaking.

The residential property has to be either a:

• Free standing house, or
• Detached villa or townhouse with a definable land area.

The purpose of the valuation is a market valuation for mortgage security purposes and requires you to complete a full valuation report (not a pro forma report) in accordance with API standards and guidelines, most notably the latest edition of the Australia and New Zealand Valuation and Property Standards. 

• Purpose: The primary purpose of this property valuation is to provide guidance to prospective buyers and assess the value of the property for mortgage purposes.
• Standards: This valuation intends to embody all the “good practices for Property Valuation laid down by International Valuation Standards Council. (IVSC)

Scope: The scope of this valuation note is limited specifically to the property mentioned, the client applying for the valuation. and only intends to serve as a guidance note.

• Valuation Date: The valuation is valid only for 90 days from the day of publishing or until the date specified. Valuations results will change as the general housing prices in the market may change. Thus, there shall be no liability acceptable in case of losses incurred due to wrong valuation after the period of the valuation estimate has expired.
• Valuation Standards: This Note recognizes and applies the guideline laid down by “International Valuation Standards” 1 and 2 as laid down by the International Valuation Standards Committee. All valuation projected in this report is intended to maintain the highest possible consistency with the concepts and the definitions given thereby. However, there may be inconsistencies with the IVSC Standards due to the application of the Australian valuation practices viz: “Statutory Valuation and Practices Under Land Valuation Act 2010”(Queensland Government, 2017) As mentioned, in case of differences in valuation practices, the domestic valuation practices of Australia and the state if Queensland supersede the IVSC practices and standards.
• History
  • Site Sold Jan 2007: 225,000
  • House built: August 2012: 236,000
  • September 2014: 620,000

• Third Party Liability:  This valuation note intends to serve as an “advisory” strictly for the valuation requesting party, hereby known as the “Client” and the valuation service provider, ( Insert Student name or Valuation Practice Name Recommended by Student”, hereby known as “consultant”.  The report is not intended to serve as an advisory to any other person or entity. Hence, there will be no third party liability for this valuation note.
• Liability in unforeseen circumstances: The report has been provided keeping in mind a business-as-usual scenario for the validity of the report. The report is not valid in case of the occurrence of unforeseeable circumstances such as property damage due to natural disasters such as hurricane etc.
• Market Risk: The valuation mentioned in the report is subject to market risks.

Valuation services instructions were provided by “Student’s name” upon request by Mr. Chris Eves for the purpose of security mortgage under standing instructions from The Great Australia Bank. Primary data was collected upon inspection of property in –person and secondary data was collected from various sources.

• Property address: 46, Overlea Street, Brisbane 41004
• Land and Title Details: (Title name) Cannot fill without authorized log in f student
• Local government : Brisbane City Council
• State: Queensland
• Registered proprietors: Cannot fill without authorized log in of student
• Land size: 766 square metres
• Lot Number/ City: 31, Brisbane
• City Zone Name: Bayon- Nudgee Zone.
• Legal description of Property: 31/ 167990
• The lease on the property expires on.. (Need information from  student) Cannot fill without authorized log in of student

No visible easements, encumbrance or any restrictive covenants on property sale were noticed.

The existing use of the property is “private residential use” and all the assumptions applicable to the existing use of residential properties according to Sections 22 and 28 are applicable to the property. (Queensland Government, 2017)

The property is located in Nudgee, a north suburb of Brisbane and is at a distance of approximately 18 kilometres from the Central Business District. The Brisbane Airport is approximately 10 kilometres away. The Nudgee railway station is at a distance of 1.5 kilometers and Banyo Railway station at one kilometre distance via St. Vincents Road. The Nudgee Suburb is also located close to the Airport link industrial estate. (Brisbane City Council, 2017) 

The street is close to major road likes like the Nudgee Road and the St. Vincents road. The nearest P-12 school is Earnshaw State college at 1.4 kilometres distance. The nearest Medical Centre is the Hamilton Medical Care Centre. The Australian Christian University is also located as a part of the Nudgee suburb. The development in the area is pre dominantly low density detached housing and hence has several retail shopping and dining outlets. (Brisbane City Council, 2017)

The property also bears reasonable proximity to leisure and recreational spots such as the Nudgee Beach  (located approximately at 5 kilometres distance). The street is located approximately 3.5 kilometres away from the Nudgee Golf Course and approximately 2.4 kilometres away from the Virginia Golf Club.

The Nudgee Suburb is a part of the Nudgee Banyo Zone designated by Brisbane City Council the Nudgee has been classified as “Low Density Residential” zone by Brisbane City council. The Brisbane City Council classifies it as “Low impact industry buffer” which implies that currently, the impact of industrial development. The property is a part of Lot 31, plan SP167990, legal description given as  31/ 167990. The neighbourhood is a part of “(Banyo—Nudgee neighbourhood plan/NPP-006” (Brisbane City Council, 2017)

The highest and best use of the property is residential house of two storey’s. (Brisbane City Council, 2017)The given property is the highest and best use of the house.

The standard valuation applies to the entire physical structure of the property. Other charges such as transaction costs, state and central taxes such as Goods and services taxes, transaction charges levied by the state are extra if the valuation. (Queensland Government, 2017)

There are no significant infrastructural improvements required to the house. The valuation of the house may not increase due to any further infrastructural improvements. The value of improvements according to section 25 is nil.  (Queensland Government, 2017)

Instructions

 There are no environmental issues that prevent the sale of the property.

The approach used to value this property is “sales comparison” approach i.e the sales of similar properties are compared and the valuation is decided. This method has been chosen because this method is extensively used while providing valuations of residential properties. (Abdul-Samad, 2017). The basis of valuation of property is the market value of a sale of a property that is most similar to the given property. However, the property used for sales comparison was sold in the past. The time lag has been accounted for by gaining data on the growth rate of property prices and accounting for that growth by way of compounded interest.

Further, the sales data of other similar properties sold in the last 18 months has been taken, in order to critically evaluate the valuation price. A range of the possible valuation options is also projected based on data available from secondary sources. The “market value” of the entire property has been taken on an arm’s length transaction basis. It is assumed that property is being valued for mortgage purposes as a housing establishment. Hence, taxes and transaction costs are not included in the valuation. These costs would be applicable only when the property would be for sale. The property valuation is based on market data as well as some generic data provided by Brisbane City Council (See Annexure 1)

The housing prices in Brisbane have grown since 2014. However, some studies estimate that the housing prices in Brisbane may experience a sharp drop. This may be due to the glut in the housing market as a number of housing projects that were in the pipeline are on the verge of completion. Thus, the supply is expected to be greater than the demand. (Reserve Bank of Australia, 2017)  The statutory land valuation has shown the following growth since 2012. Generalizing these rates for the Nudgee – Bayonee suburb, it can be said that the price for a similar house has grown at the rate of 6 percent per annum.

Table 1 Historical Trend for Land Valuations Growth Rate in Brisbane

Source: Queensland Government (2017)

Year	2013	2014	2015	2016	2017
Growth Rate	–0.5	3.0	9.7	9.9	6.0

The property should exchange at AUD 726100 (exclusive of transactions costs) on a market value basis between a willing buyer and a willing seller.

Given below is the appraisal of the maximum, minimum and median price (in AUD) for the same property. (For Calculations, please see Annexure points a), b), c)

Table 2 Projected Maximum, Median and Low Valuation for 46. Overlea Street,  Brisbane QLD 4104

Maximum	792321
Median	72610 0
Low	620,000

In order to validate the accuracy of this data, the estimate of the price was compared to prices provided by some other property vendors. The data for this was gathered from their websites

Given below is data for some properties that were sold in the last 12 months in the Bayon Nudgee area and are similar to the given property. This data is secondary data. Hence, the data may not be completely accurate. However, the confidence level in the data given below is fairly high since the data directly from real estate agents. It must be noted that the valuation of the property being valued is not based on the data but will be merely compared to.

Table 3 Sales Comparison: Comparison with other similar properties.

Source: Prepared by Author.

No	Property Address	Bedrooms	Bathrooms	Car Parking Spaces	Floor Size (in Square Meters)		Sale Date		Sale Price was obtained (in AUD)	Reference Website
1	23, Overlea street, Brisbane 41004	4	2	2	636	August 2016		685,000			(RealEstate.com.au, 2017)
2	31 Overlea Street, Nudgee, QLD 4104	4	2	2	NA	January 2016		810,000			(RealEstate.com.au, 2017)
3	11 Tenalga Court Nudgee,  QLD 4104	4	2	2	901	October 2017		570,000			(RealEstate.com.au, 2017)
4	77 Forrest Street, Nudgee,  QLD 4104	4	2	2	760	September 2017		810,000			(Place Estate Agents, 2017)
5	132 O'Doherty Circuit, Nudgee, QLD 4104	4	2	3	400	July 2017		685,000			(PlaceEstate.com)
6	13, Conlan Street, Nudgee, Brisbane,  QLD 4104	4	2	2	604	June 2017		645,000			(Place Estate Agents, Nundah, 2017)
7	77 Forrest Street, Nudgee, Brisbane,  QLD 4104	4	2	2	857	June 2017		775,000			(PlaceagentEstate.com, 2017)
8	Lot 29, 78 Weyers Road , Nudgee, Brisbane,  QLD 4104	4	2	2	809	September 2017		733,387			(Vantage Homes, QLD, 2017)

The median price of these houses is AUD 685,000. This is less than 5% difference than the property valued in this report. The median price should be the minimum price for the property being values.

Given below are some of the appraisals provided by real estate agents. These appraisals have been taken from secondary source but can be considered reliable since they have been taken from real estate agents.

Table 4 Secondary Data regarding Real Estate Agent Appraisal of the Property

Source: Prepared by Author.

Appraisal Provider	Valuation	Link to Appraisal
Real Estate View, Australia	AUD 724,333	https://www.realestateview.com.au/property-360/property/46-overlea-street-nudgee-qld-4014/
Real Estate	AUD 715472	https://www.realestateview.com.au/property-360/property/46-overlea-street-nudgee-qld-4014/

1. The price of the property is being pegged at the price of the property located at 23, Overlea Street, Brisbane 41004 in August 2016 since the location and physical layout  of the property bear the closes resembalance to the property being evaluated. The annual growth rate is take at 6 percent per annum.  Calculating the price of the housing for 1.25 years, the price of the property can be calculated at 72610 0.
2. Similarly, the house was previously sold at 620,000 in September. Compounding this price at the annual rate of 9.7, 9.9, 6.0 , we get the following estimates. However, these growth rates are generalized for the city of Brisbane and may not be the best estimates. Hence, these estimates can be taken as the maximum estimates.

Table 5 Project House Prices based on Land Evaluations Trends in Growth Prices of Housing in Brisbane

Source: Prepared by Author.

	2014	2015	2016	2017
Brisbane	620,000	680, 140	747473	792321

The median price of similar houses in the suburb. Calculated using formula for Median.

Abdul-Samad, H. (2017, June 27). The 3 Main Property Valuation Methods. Retrieved October 20, 2017, from Nelson Brothers: www.nelson-brotherspm.com/3-main-property-valuation-methods/

Brisbane City Council. (2017, May 19). Brisbane City Plan2014 Mapping: Zoning Maps. Retrieved from https://www.brisbane.qld.gov.au/planning-building/planning-guidelines-tools/brisbane-city-plan-2014/city-plan-2014-mapping/zoning

Place Estate Agents. (2017). 77, Forest Street, Nudgee QLD 4015. Retrieved from https://www.domain.com.au/77-forrest-street-nudgee-qld-4014-2013809256

Place Estate Agents, Nundah. (2017). 13 Conlan Street, Nudgee QLD 4014. Retrieved from https://www.domain.com.au/13-conlan-street-nudgee-qld-4014-2013617100

PlaceagentEstate.com. (2017). 80 Forrest Street, Nudgee QLD 4014. Retrieved from https://www.domain.com.au/80-forrest-street-nudgee-qld-4014-2013564585

PlaceEstate.com. (n.d.). 132 O'Doherty Circuit, Nudgee QLD 4014. Retrieved from https://www.domain.com.au/132-o-doherty-circuit-nudgee-qld-4014-2013643497

Queensland Government. (2017, March 8). Historical Trends in Land Valuation. Retrieved October 20, 2017, from Queensland Government: https>//www.qld.gov.au/environment/land/title/valuation/trends

Queensland Government. (2017, September). Statutory Valuation Procedures and Practices under the Land Valuation Act 2010. Retrieved from https://www.dnrm.qld.gov.au/__data/assets/pdf_file/0011/35966/stat_val_manual.pdf

RealEstate.com.au. (2017). Place Estate Agents. Retrieved from https://www.realestate.com.au/sold/property-house-qld-nudgee-121561326

Reserve Bank of Australia. (2017, February). Box A: The Pipeline of Residential Dwelling Work . (Reserve Bank of Australia) Retrieved September 11, 2017, from Statement on Monetary Policy – February 2017: https://www.rba.gov.au/publications/smp/2017/feb/box-a-the-pipeline-of-residential-dwelling-work.html#fn3

Vantage Homes, QLD. (2017). Lot 29, 78 Weyers Road, Nudgee. Retrieved October 20, 2017, from www.ksouhouse.com: www.ksouhouse.com/p.php?q=Nudgee