1 YEARS OF EXPERIENCE Director 1 Associate Director 2 QRM - - PowerPoint PPT Presentation

VALUATION & ADVISORY SERVICES

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Residential Valuations Coverage

Greater Perth Metropolitan & South West Regions

2

QRM Valuation Managers

1

Associate Director

1

Director

24

Valuers

CONTENT

01

ABFI Standing Instructions for Valuing Residential Properties

02

Construction VALUATIONS

• Sales and Building

Cost analysis

• Valuation

methodology

03

Valuation Challenges and changes through COVID- 19

ABFI Standing Instructions

First Mortgage Valuation & Security Assessments

• In scope/out of scope
• Definitions and Highest and Best Use
• Construction and Off the Plan VALUATIONS
• SALES evidence
• Assessing Risk
• Progress Inspections and Restricted Assessments

• Market Value Premise of Value

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

• Australian Property Institute
• ‘Highest and best use’ is defined as “the use of an asset that maximised its potential and that is physically

possible, legally permissible and financially feasible.”

• Where the subject property is ‘under contract’ at the date of valuation the Valuer must consider the

negotiated and agreed ‘purchase price’ of the subject property, the date of the contract, and the veracity

• f the sale.

ABFI Standing Instructions

Valuation Assessment

• Settled Sales’ evidence in the Report should include a minimum of three (3) sales
• f properties considered by the Valuer to be most comparable sale properties; and

ideally

• be within six (6) months of the date of valuation; and also
• be within 15% (plus or minus) of the market value adopted in the report
• Where this is not achievable (that is, where there is limited or no sales evidence of

comparable properties) the Valuer must provide additional and specific comment in relation to sales evidence.

• The Valuer should advise what adjustments have been made and the basis of

comparison (e.g. dated sales or out of area sales).

• ‘Under Contract / Unsettled Sales’ can be considered by the Valuer and, if

deemed appropriate, included in the Report. When an ‘under contract / unsettled sale’ is included it must be clearly identified as either ‘Under Contract’, ‘Unsettled Sale’ or ’Agent Advised’ in the description of the ‘sale’.

ABFI Standing Instructions

Sales Evidence

The Valuer has a duty to undertake a ‘kerbside’ inspection of all sales evidence relied on in the Report Sales evidence included in the Report must be re-sales rather than the ‘first’ sale of the property from a developer

The Valuer should also consider the following additional information, and, if deemed appropriate by the Valuer, retain on file.

• Contracts for sale that have been entered into but not completed
• Developer sales that are from the same development

Strata Sales

• When considering sales evidence for the valuation of ‘new’ units/apartments/townhouses, the Valuer must provide a minimum of three

(3) re-sales external to the subject development. This does not mean that re-sales in the subject complex be discarded, but that they need to be compared against the market.

ABFI Standing Instructions

Sales Evidence and the Market

ABFI Standing Instructions

Other requirements

NDIS (National Disability Insurance Scheme) Electrical Padmount Stations Restrictions on Resale & Special Conditions within a Contract API – Property Risk Ratings Identifying Electricity Line

• A Construction valuation is completed on an ‘As If Complete’ basis and provides the market value of the proposed

improvements assessed on the assumption that all construction has been satisfactorily completed in accordance with the plans and specifications provided and final Council Approval obtained.

• The valuation assumes that the residence will be constructed in accordance with the approved plans, the Building Code of

Australia to trades standards and that all necessary final certificates will be issued on completion.

• The valuation reflects the Valuers view of the market conditions existing at the date of the report and does not purport to

predict the market conditions or the value at the actual completion of the improvements.

Construction Valuations

If the tender including contract and non- contract items does not represent a fully established dwelling (e.g. excludes driveways, landscaping, floor coverings, etc.) then:

• 1. Appropriate adjustments will need to be made when comparing the

proposed dwelling to fully established sale properties (that is landscaping, fencing, driveway and risk analysis).

• 2. Appropriate comments will need to be made regarding the impact
• n marketability and value of the subject property not being fully

established at the completion of the building works (in accordance with the building documents supplied and relied upon).

Construction Valuations

Costings and Considerations

‘As If Complete’ valuations should

not be the precise sum of the price paid for the land plus the building contract as Valuers should determine an appropriately rounded market value with reference to sales evidence

Consider the following:

• Type and size of improvements
• Level of finish of improvements
• Age and Condition of improvements
• Presentation of improvements
• Car accommodation
• Swimming pools, tennis courts, sheds
• Land area
• Zoning

Minimum of 3 x sales ideally within past 6 months and 15% of market value

Construction Valuations

Sales Evidence – Compare like with Like

Direct Comparison

• Compare each sales evidence in

relation to the subject property

• Inferior, superior or comparable to the

subject property

Summation

• Underlying land value from vacant land sales with similar location, size,

zoning

• Apply a building rate to internal living area, outdoor areas, car

accommodation, landscaping, fencing, driveway, ancillary improvements, retaining walls

• Depreciation

Construction Valuations

Valuation Methodology

DEPRECIATED REPLACEMENT COST LAND VALUE SUMMATED VALUE

Information Required:

• Offer and acceptance of land, if applicable
• Building contract including Progress Payment

Schedule

• Building plans
• Specification
• Addenda to specification
• Quotes

Note: Critical that we receive the full offer and acceptance, inclusive of any rebates or incentives

Construction Valuations

Construction As If Complete Valuations

Not just land contract PLUS building contract

• We need to assess the market value of the subject property upon completion, compared to

the sales evidence within the market of similar properties

• Referring back to the definition of Market Value - “The estimated amount for which an asset or

liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

• Check rate per sqm of building costs – under, in line or above
• Keep in mind, we are comparing to fully established homes including front and rear

landscaping, internal wall painting, which are commonly not included in many building contracts

COST DOES NOT always EQUAL VALUE

• Comparison to established properties
• Front & rear landscaping
• Internal wall painting
• Window treatments, light Fittings, A/C, security, pools, patios, sheds, floor coverings

Sales Evidence

Construction Valuations

Construction As If Complete Valuations

Compare like with like

LOT SIZE: 295sqm CONFIGURATION: 3 bedroom, 2 bathroom, entry, dining, kitchen, meals, laundry, alfresco and porch INTERNAL LIVING SIZE: 123 sqm QUALITY FIT OUT: Standard project fit out with floor coverings, window treatments, air conditioning ANCILLARY: Paved driveway, porch and alfresco EXCLUDES: Internal wall painting and landscaping LAND: Under Contract $177,000

• Full contract supplied
• Includes boundary fencing and front landscaping. No other incentives.

BUILDING CONTRACT: $204,515 reflecting $1,663/sqm internal living area. Within Bushfire Prone Area.

• Base: $184,490 reflects $1,500/sqm internal living area
• Site Works: $16,550
• Variations: $3,475
• Excludes internal wall painting and rear landscaping

Construction Valuations

Case Study 1 – Lot 1915 Mirt Trail, “xxx Estate”

Subject

Construction Valuations

Case Study – Lot 1915 Mirt Trail, “xxx Estate” | Sales Evidence Map

Land Size Config. Living Size Year Built Fit Out Quality Ancillary Sale Date Sale Price Location Comparison 1 Regatta Way, 371 4 x 2 144 sqm 2015 Average Alfresco Oct 2019 $307,000 Superior Inferior 28 Darbyshire Parade 347 3 x 2 142 sqm 2018 Basic – lacked rear landscaping Alfresco Dec 2019 $325,000 Inferior nearby Marmion on east side Inferior location, older improvements,

• n larger land

52 Missingham Avenue 450 4 x 2 156 sqm 2015 Basic Alfresco Aug 2019 $360,000 Similar Slightly superior 98 Pectoral Promenade 373 3 x 2 171 sqm 2016 Average Alfresco Oct 2019 $390,000 Superior west of Marmion Superior 24 Fresco Way, 375 3 x 2 180 sqm 2019 Display home 12 month leaseback 7% return Alfresco Jan 2020 $415,000 Similar Superior Subject 295 3 x 2 123 sqm TBE Average Alfresco

• east of Marmion
• LAND PLUS

BUILDING CONTRACT VALUED AT $350,000

$381,515

Subject Land Area: 295sqm Build: 3 x 2 123sqm single level house Standard project finish; excludes internal painting and landscaping

Construction Valuations

Case Study – Lot 1915 Mirt Trail, “xxx Estate” | Sales Evidence

LOT SIZE: 381sqm CONFIGURATION: 4 bedroom, 2 bathroom, entry, kitchen, meals, living laundry and 1 separate toilet INTERNAL LIVING SIZE: 177sqm QUALITY FIT OUT: Standard project fit out with floor coverings, window treatments, air conditioning ANCILLARY: Paved driveway, porch and alfresco LAND: Under Contract $192,000

• Contract supplied comprises first two pages
• No mention of any incentives/rebates such as fencing and front

landscaping. BUILDING CONTRACT: $231,058 reflecting $1,305/sqm internal living area

• Base: $181,793 reflects $1,027/sqm internal living area
• Site Works: $22,953
• Variations: $26,312
• Excludes internal wall painting

Construction Valuations

Case Study 2 – Lot 341 Woodville Road “xxx Estate”

Area $/m2 Main 253 1250 $316,250 Carport 35 575 $20,125 Outdoor 25 650 $16,250 Total Areas 313 Gross Building $ Rate Per Sqm $1,126.60 Building Contract 370,884 $ Land Sale 292,000 $ COST 662,884 $

Fallow Way, Alkimos

Improvements Description: 5 Bedrooms, 3 Bathrooms, Study, Scullery, Dining Room, Living and a Double Garage. Excludes: Internal painting, rear landscaping and driveway crossover.

Construction Valuations

Cost and Value

Fallow Way, Alkimos Sales Evidence

11 Auger Way Sold $653,000 19/09/2015 Site Area: 522 sqm. Living Area: 252 sqm Contemporary Two storey dwelling, c2014 Brick/Colorbond construction 4 bedrooms,2 bathrooms, Alfresco Broadway Home, ex Display Fully finishes throughout internal and external Asking price: $740,000 Feb 2015 $680,000 - $695,000

COVID-19

Challenges and Changes

COVID-19 Updates – Addressing complex issues Virtual Inspections Amended Valuations Local Economy Impact Sales Evidence pre-COVID-19 New level of delays Valuation Uncertainty

22

Recent Market Direction (Price) - Risk Rating 3

A noticeable change in buyer sentiment developed in the local housing market at the conclusion of the Election in May 2019. While some segmentation in the market remained following the election, the housing market generally saw renewed positive momentum in fundamentals. Until mid-March 2020 market sentiment was generally moving in a positive direction with improved buyer confidence, stronger rental market and stable prices leading to some growth in values in sought after locations. However in recent weeks the outbreak of the Coronavirus (COVID-19) has caused massive disruption to local and global financial markets. In an effort to offset the impact of Coronavirus (COVID-19) on the Australian economy the Federal Government has introduced a number of economic stimulus packages to underpin business and individuals affected by closures

• r shut down of operations. In addition the RBA has met twice in one month to reduce interest rates by 0.5% to 0.25%. It is yet to

be seen if these stimulus moves will hold off any significant negative change in the local housing market. Uncertainty and the potential of increased market volatility in the housing market appears obvious in the short to medium term following new Federal Government regulations to enforce social distancing. The Property Risk Rating adopted with the valuation reflects current market uncertainty.

COVID-19

Challenges and Changes – Risk Rating

23

Market Volatility - Risk Rating 4

The outbreak of the Novel Coronavirus (COVID-19) has caused some initial uncertainty in local and global financial markets and while it is yet to have any quantifiable impact on the local or broader property market, a prolonged outbreak is likely to have an impact on the broader economy which may result in increased market volatility in the local market.

Local Economy Impact – Risk Rating 4

The full impact of Coronavirus (COVID-19) on the housing market is uncertain at this point in time and will unfold dependent on both the scale and longevity of the pandemic. The National economy is now operating well below capacity. Industries such as Tourism, Food and Beverage, Retail and Entertainment sectors were the first affected, however, many more businesses are now impacted following Federal Government's directives regarding social distancing. Evidence is emerging that some sales agreements previously negotiated have now been withdrawn. Equally, it would also appear that some vendors have withdrawn their properties from the market. It is envisaged that market volatility will continue to evolve in the housing market as the impact of Coronavirus (COVID -19) impacts the economy. Our valuation is based on the information available to us at the date of valuation. Given the heightened uncertainty, a degree of caution should be exercised when relying upon our valuation.

COVID-19

Challenges and Changes – Risk Rating

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