Understanding property valuations, values and prices

Understanding property valuations, values and prices

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There is a lot of terminology to understand in the property market, and property valuations, market value, market price and comparative market analysis are four of the terms that often get confused. The property experts at Seeff sheds light on these terms and explains how properties are valued and prices determined.

Defining property valuations

A property valuation is an amount that the municipality uses to determine the property taxes to be paid on a property. A bank also uses a valuation to determine how much it can grant as a home loan to a prospective buyer. This is different to a property price, which is the amount that a prospective buyer sees fit to pay for a property when it is put up for sale.

What your property is worth and what you can sell it for can be two different things. The value of your property (what it is worth) is referred to as the market value, while the actual amount you sell it for is the market price. It may be that you consider your property to be worth a lot more than what the market will pay for it. Ultimately, it is buyers and the market who decide what the right price for a property is at a particular point in time. 

The price that your property sells for will depend on the state of the market at the time of selling. If you were selling in a sellers' market, you may get more for your property than if you were selling in the buyers' market that currently prevails in South Africa.

Getting to grips with market value

Market value is an educated opinion of what a property will sell for in a competitive market at a particular point in time. It is arrived at by a property professional, taking into account the location, size of the land (if applicable), size of the home and its features and finishes. The market value is also determined by what similar properties in the area, street or complex are selling for at the time of valuation.
 
Market prices explained

The market price is what a willing buyer will pay for your home. In an ideal property market, buyer competition will drive up selling prices. When the next municipal assessment is done, this higher market price will influence the market value that the local council attaches to the property, and so the cycle continues.
 
Understanding Comparative Market Analysis (CMA)

There is no one-size-fits-all approach to market values and property prices as each property is unique. A Comparative Market Analysis (CMA) is generally regarded as the most accurate tool used to determine a property's value. 

This analysis takes into account information and statistics gathered from various sources, which is compiled to find an average price per square metre of property in the area. This calculation takes into account recent sales but is also balanced against other factors such as the condition of the property, its size, features, finishes, fixtures and other aspects which sets it apart from other properties in the area, street or complex. 

Since each property is unique, each property requires a unique evaluation. Your property may be renovated or could have an excellent location. Either way, a skilled area agent is best placed to provide an informed and considered assessment. They understand the local market and know what will sell and what the asking price should be.

City of Cape Town's general valuation roll extended by one year

In light of the challenges faced by members of the public in finalising their GV2018 municipal values, the next general valuation date was moved from July 2021 to July 2022. While South African municipalities are required by law to perform a general valuation (GV) every four years, the City of Cape Town has done so every three years since 2006. The most recent general valuation was carried out in 2018.

For more information about property values, market prices, market value, comparative market analyses and valuation rolls, contact Seeff today. Their team has decades of experience in helping clients successfully buy and sell property. You can trust us to value your home accurately.

Note: This post was originally published in September 2018. It has been completely revamped and updated for freshness, accuracy, and comprehensiveness in December 2021.

Author: Seeff