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Sunday, March 30, 2008

Getting proper property valuation

If you were getting your house sold, you’d most probably be getting it valued.
Or perhaps you need to get a loan from the bank. Or maybe the authorities are buying up the land on which your house sits, and you’re not satisfied with the amount awarded as compensation.

“Property valuation is done for various purposes, most commonly for loan financing. Besides that, properties being auctioned by banks need to be valued too, to establish the reserve price,” says Low Khee Wah, valuation assistant manager of Henry Butcher Malaysia Sdn Bhd.

Low: Valuers need to understand the market

What is property valuation? According to C Y Lim, general manager of City Valuers & Consultants Sdn Bhd, it is “the art and science of estimating the value for a specific purpose of a particular interest in the property at a particular moment in time, taking into consideration all the underlying economic factors of the market, including the range of alternative investments”.

Lim: Art and science of estimating the value

Henry Butcher’s Low elaborates: “It is an art because valuers need to understand the market, they need to have a “feel” for it, and which is acquired the longer the valuer is in the industry. It is also a science, because formulas are needed to do cash flows.” In short, property valuation is to estimate the value of the property for a specific purpose.

There are five methods used to value property: comparison method, investment method, residual method, profit method, and cost method, and each method has its specific use. According to Low, the investment method is usually applied for the valuation of office towers, shopping complexes and plantations, while development lands are usually valued with the residual method. Profit methods are used for hotel valuations, and detached factories would be valued with the cost method.

“Different valuations are done with different methods for different types of properties, the most common being the comparison method, which is used for the valuation of residential properties,” says Low. This approach compares a property with similar properties that were either transacted recently, or listed for sale within the vicinity or other comparable locations.

“The valuation process takes about 10 working days for a residential property. Nowadays, it is quite fast with the help of technology, since everything is computerised,” says Low. If there are hiccups within the process, such as not being able to contact a client, it might take longer. For a corporate office, the process could take three weeks and for big corporate exercises, it could take about a year.

When a property is valued, several factors are considered for adjustment. The first is the location, both specific and overall. The specific location would be the address, and the overall location being the surrounding area or the neighbourhood. “The condition of the property is important as well. Valuers will check for any visible defects such as cracks, leakages and termite infestations,” says Lim of City Valuers & Consultants, adding that house owners getting their property valued should fix all visible defects prior to the inspection date. “Try to clean your house and arrange it in such a way that it looks spacious during the inspection,” he advises.

In general, renovations and extensions that increase space would add value to a property, provided that the quality is good. Other factors taken into account would be the tenure, accessibility, shape of land, land terrain, land size, renovations and extensions done to the property. All things being equal, a property on the top of the hill is most likely to be worth more than a property at the bottom of a slope, says Lim.

“Common sense tells us that a house on higher ground would be naturally more secure than a house which you can look into from the road,” he explains.

“In past experiences, properties located at T-junctions don’t sell as well as others. Imagine that your house is located at a T-junction; it would be inconvenient and there would be no privacy. Some may call it feng shui, but it really is just common sense,” says Lim. “In particularly Chinese
areas, feng shui would matter a lot more.”.

In addition to the above, valuers would consider economic and legal factors too, says Lim. “Demand and supply, economic cycles, special growth areas and changes in land use patterns all affect the value of property. The tenure of the land, restrictions and conditions of the land title as well as legal encumbrances such as squatters are considered too,” he elaborates.

Having considered all of the above factors, valuers will then arrive at the value of a property. “It may appear simple when an experienced valuer is at work, but this is only because he had previously gone through all the processes of training and is now so familiar with the job that it appears simple and rapid,” says Lim, who has been in the industry for 17 years.

According to him, the mathematical contents of a valuation will be very simple, but the art of expressing an opinion in mathematical form is complicated and only comes with experience.

“We must also understand that there is no such thing as ‘the value’ or a specific value,” says Lim. There is always a range of values, he explains. “There are also many misconceptions when it comes to property valuation. Prices in newspaper advertisements and listings do not reflect the going rate, rather these prices are indications of how much owners think their homes are worth. And of course, as a home owner, you would like to believe that the highest value is the value of your home,” he says.

“The problem with speculating prices is that the professional is often ignored, especially in local areas. People tend to think that they know the market very well especially if they live in that area, but no two properties are the same,” says Lim.

For example, a property near Mont’ Kiara would not necessarily appeal to expatriates the way a property located within Mont’ Kiara does.

Henry Butcher’s Low says that most valuers work in specific locations, as it would help them understand the market in the area better, which in turn would make the process of valuation much smoother.

Low advises anyone who wants to get property valuation done, to approach a respectable valuation firm. “Besides valuing property, they do provide advice as well,” he adds.

By theSun (by Yeong Ee-Wah)

City condos receiving youthful response

You only have to look to UDA Holdings Bhd's Gaya Bangsar condominium in Kuala Lumpur to see the penchant among youthful urbanites for city living.

Just weeks after the project's official launch in January, all its 285 units have been sold to the " young and upwardly mobile crowd".

According to the developer, demand was driven by the city's hip and affluent crowd for trendy, avant-grade homes in vibrant, prestigious locations.

The up-and-coming 34-storey Gaya Bangsar is being built on 1.27 acres beside Dataran Maybank along Bangsar's Jalan Maarof and near the Jalan Telawi nightlife hub, Bangsar Shopping Centre and MidValley City. It is also close to the city's main transportation hub of KL Sentral.

Choice of units ranged from 671 sq ft studios to 1,610 sq ft three-plus-one bedroom units priced from RM 359,000 to RM 945,000, which would collectively generate a gross development value of RM155 million.

In keeping with style, UDA said all the units, which are expected to be ready by 2010, were designed with built-in kitchen cabinets and balconies overlooking either KL city, Damansara, Petaling Jaya or Seputeh.

Larger units would also come with private lift lobbies.

Earlier this year, another condominium targeting young and wealthy urbanites also experienced similar response.

One Jelatek by Tan & Tan Developments Bhd, situated at the fringe city enclave of Ampang, saw 90 per cent of its units sold within hours of its official launch, at prices equating to RM 460psf.

By New Straits Times (by Chris Prasad)

Are global investors shying away from Asia?

It looks like better opportunities now lie outside Asia, "for investors who think they can spot a market trough and ride a recovery".

With the markets in United States and Europe rapidly softening, opportunistic investors are now refocusing their sights and looking at distressed assets that are mush-rooming in the wake of the US subprime crisis.

Also in their sights is Japan, as the country starts practising tougher loan approvals.

Fund managers at a recent conference in Hong Kong said many global hedge funds have stopped dabbling in the region's property and though private equity players continue to develop in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

A recent Reuters report said many funds and private equity firms that made "fat profits" from the revival of Asian property markets following the 1997-98 financial crisis are now looking elsewhere.

It quoted Morley Fund Managers' Asia fund strategist Guy Cawthra as saying, " Six months ago, we didn't have to answer questions about why invest in Asia ... now investors say, "we might not want to invest in Asia, we want to invest in Europe, UK and the US".

JPMorgan analysts said US commercial real estate values could, in the next five years, fall 20 percent from their 2007 peak because of tight credit and a worsening economy, while London's office rental values, which dropped 12 per cent from their peak last June, would fall a further 10 per cent through to 2009.

Fortis Investments head of real estate Bart Coenraads thinks " a lot of investors would return to home markets and some would buy distressed properties and refinance them ... ( in order to) make good returns".

By New Straits Times (by Zoe Phoon)

Hilton building Doubletree presence in Malaysia

The full-service brand can increase performance of underperforming hotels, says executive

Doubletree by Hilton Beijing in China, the first Doubletree in the Asia Pacific, is scheduled to open for the 2008 Olympics

The country’s growing affluence and attraction as an international tourist destination, especially among Middle Easterners, has caught the attention of Hilton Hotels Corp (HHC) that’s on a multibillion-dollar global expansion drive.

“We see great potential for resort destinations to continue to grow and we’re actively looking for opportunities to open Hilton and Doubletree hotels in places such as Langkawi, Penang and Kota Kinabalu, as well as in Kuala Lumpur and Malacca,” said HHC president for Asia Pacific Koos Klein.

“We expect rates to continue to grow and are very confident about the Malaysian hotel and resort markets.”

Klein was in KL recently to meet with potential hotel owners and investors on development opportunities through management and franchising as well as to explain its Doubletree upscale full-service brand.

“Malaysian hotels can benefit from the value-adds of Doubletree by Hilton because it’s a slightly smaller product than the Hilton product, and is very flexible in terms of ability to be used as a new-build brand or a conversion brand.

“Around 90 per cent of the Doubletree hotels in the United States have, in the past three years, been converted from existing branded hotels and their return on investment is clear.

“Once converted to a Doubletree, on average their ‘revenue per available room’ performance would improved by 27 per cent within 12 months of operation,” Klein said, adding that the product also has the potential to be located in central business districts, resort destinations, airports, office precincts or industrial parks.

“For instance, the Doubletree by Hilton Beijing is opening in downtown Beijing, 8km from Tiananmen Square, while Doubletree by Hilton Kunshan is opening in a part of China that sits between Shanghai and Suzhou, an industrial park.

“The Doubletree that’s opening in Thailand this year is located at the foot of Sri Racha Hills and on a golf course, with a leisure and MICE (meetings, incentives, conventions and exhibitions) appeal.”

On Doubletree’s other value-drivers, Klein said it has access to the Hilton sales and marketing engine that powers the performance of over 3,000 HHC hotels worldwide, as well as access to training programmes for hotel sales staff.

It also has access to the customer relationship management programme, Hilton HHonors, which has 21 million members in 230 countries.

“Our flexible pricing and modelling software enable us to set our pricing by day and length of stay, and to maximise revenue,” Klein explained.

HHC also engages in search word marketing and buys 155,000 words on search engines in 60 countries, and employs an online marketing specialist that optimises the presence of its hotels in global search engines.

For those interested in Doubletree’s managed or franchise aspects, its brand performance vice-president J. Michael Williams said the cost of converting to, or building a Doubletree hotel, depends on the hotel owner’s existing property or plans for a new property.

“We often see the Doubletree brand increasing the performance of underperforming hotels,” Williams said, adding that the company’s architects, designers and interior designers would assess an existing asset and advise on what is required for the conversion process.

The HHC brand, Klein said, caters to every price point – the value-conscious (via the Hampton brand) to the elegant and sophisticated (the Conrad) and the super wealthy (the Waldorf- Astoria Collection).

In Malaysia, the four Hilton hotels in KL, Petaling Jaya, Kuching and Batang Ai are “performing well, with revenue per available room growing 12 per cent and the average room rate increasing 14 per cent year-on- year”.

By New Straits Times (by Zoe Phoon)