How a valuation is determined
How a valuation is determined

In simple terms, a valuation is an assessment of the amount a property would sell for on a set date.

Valuations are determined by qualified valuers who research and analyse a range of property information.

The valuation process is complex, involving continual reviews of data models and ongoing analysis of developments in the property market.

The valuer determines the value of a property based on:

  • the latest sales and rental data
  • what it is being used for at the time
  • the highest and best use of the property.

Highest and best use is a valuation principle. It means a property’s value must be based on all of the features a seller would take into account when negotiating the sale of the property.

These features can include any likely changes in use and the sale price of similar properties with the same potential.

For example, if a local council wants to acquire an area for parkland and the property chosen is currently a single residence suitable for residential subdivision, the council would have to pay the owner the market price of the land taking into account the land’s suitability for subdivision. This principle applies to all valuations for whatever purpose.

If a valuer did not apply the highest and best use principle, there would be no equitable and transparent basis for assessing market value.

To work out how much a property is worth, the council valuer starts by analysing the latest property sales and rental data to build a profile of value levels for different areas and types of properties.

This information is applied to individual properties throughout the municipality. Land size, location and house value, plus the added value of a garage, garden, driveway and other improvements are taken into consideration.

Valuation for rating purposes has become a continuous improvement process. Valuers continually review the uniformity and accuracy of their models. Valuers are active throughout the year. They maintain up-to-date knowledge of the market and a progressive understanding of the changes.

By the date of the valuation, valuers have already analysed most of the sales and rentals and undertaken test runs to check their valuation models. They then use a computer to calculate individual valuations.

The aim is to get correct data descriptions for each property and maintain them with periodic re-inspections as required over the revaluation periods. Councils run ongoing supplementary valuation programs to pick up changes such as new buildings, refurbishments, new planting and site works.