What is a property valuation?

A property valuation is a formal estimate of the current market value of a residential or commercial property, prepared by a Certified Practising Valuer registered with the Australian Property Institute. Valuations are different from real estate agent appraisals: valuations are independent expert opinions used in commercial transactions, while appraisals are marketing estimates used by selling agents.

Valuations are commissioned in several circumstances. Lenders order a valuation before approving a home loan or refinance, to confirm the property's value supports the loan amount. Buyers and sellers commission valuations to inform their pricing in private sales or family transfers. Family law settlements, deceased estates, business partnerships, and other legal contexts often require an independent valuation. State revenue offices also generate valuations of every property each year for the purposes of land tax and council rates, called Valuer General valuations or unimproved capital value.

Three main approaches are used. The comparable sales method compares the subject property to recent sales of similar nearby properties, adjusting for differences in size, location, condition, and features. This is the standard approach for residential properties. The cost approach estimates the cost of building an equivalent new property and adjusts for depreciation, used for specialised or recently built properties. The income approach capitalises the property's actual or potential income stream, used for investment and commercial properties.

A valuation report typically includes the valuer's qualifications, the inspection date, the purpose of the valuation, the property description, the methodology used, the comparable sales, the final assessed value, and any limiting conditions. Reports cost from around 350 dollars for a basic residential valuation up to several thousand for complex commercial work, and most lenders share the cost or absorb it. A free desktop valuation estimate can be obtained from sites like PropertyValue, CoreLogic, and most major bank websites, but these are automated estimates rather than formal valuations and are not accepted for legal purposes.