SUNBIZ

Is Our Residential Property Value Being Affected by Commercial Properties?

Is Our Residential Property Value Being Affected by Commercial Properties? Residential value of properties de­pends on many factors. In previous interviews with the Real Estate Licensing Board, many issues were
21 Oct 2017 11:00
Is Our Residential Property Value Being Affected by Commercial Properties?
Dr Abdul Hassan

Is Our Residential Property Value Being Affected by Commercial Properties?

Residential value of properties de­pends on many factors.

In previous interviews with the Real Estate Licensing Board, many issues were revealed especially with the huge amount of unlicensed real estate agents operating in the country.

As more and more commercial properties continue to develop in residential areas, questions are being raised on the increase in value of the nearby residential proper­ties.

Real Estate Licensing Board chairman Abdul Hassan recently sat down with Sun­Biz to tell us more about it.

ONE ON ONE WITH ABDUL HASSAN:

What are the factors that impact the price of residential properties?

There are number of factors that impact the prices including supply and demand of properties, neighbourhood, land tenure, types of buildings, availability of fund and availabilities of services and amenities in the area.

How do valuers in Fiji calculate the property value? Is there a standard

calculation?

To value a property, the valuers look into the cost approach, sales comparison approach, and income capitalisation ap­proach.

In a perfect market all three approaches should provide similar value indications.

Under Cost Approach, the replacement costs new of the subject improvement is estimated, depreciation is subtracted, and land value added to arrive at a value esti­mate.

The Sales Comparison Approach entails making a valuation by directly compar­ing the property under consideration with similar properties, which have been in the past, and using the evidence of those trans­actions to assess the value of the subject property.

Under Income Approach where the poten­tial rental income (net of all reasonable expenses) from the property is capitalised at an appropriate rate given the current market condition to arrive at its capital value; the underlying principle being that the value of the property is directly related to its income earning potential.

With the increase in commercial prop­erties being built, what would be the ef­fect on residential properties?

It depends what type of neighbourhood is created by having commercial develop­ment.

In some cases commercial operations can enhance the value of residential properties by providing shopping and other basic fa­cilities close to residential areas.

In other cases commercial activities can disturb the environment by noise, traffic congestion and other factors.

Could you please provide an example of the cost of properties in a particular area five years ago, compared to today?

Generally the price of properties has es­calated in most areas between Lami, Suva and Nausori corridors.

For example in Laucala Beach Estate the price of vacant residential lot was $100,000 now the price of same lot would be in the vicinity of $300,000.

A similar price increase is expected on im­proved properties (built properties).

What are the major issues faced in

valuing a property?

The major issues faced in valuing prop­erty are the inconsistent sale price of prop­erties.

For example, a standard two bedroom residential property was sold at $250,000 and another similar type of property in the same locality was sold at $350,000.

This does not reflect the true market of those types of properties in that district.

What is the cost of getting a valuer?

Valuation fee very much depends on the size of the property and where it is located.

For example if a property is in Taveuni then the fee will be higher, because in ad­dition to fee there will be other expenses.

However, the standard fee for single to double storey residential properties should be between $400 -$1000.

How much is the:

(i) most affordable house that an average person can buy today?

For low income earners the price range would be between $250,000-$350,000

(ii)most expensive property and where?

The price for expensive properties exceeds $1 million and they are located in most prominent areas such as Namadi Heights, Tamavua, Domain and Suva Point.

Loans provided by commercial banks, what kind of house do you think youths are best able to purchase?

It depends on their income, if both hus­band and wife employed then with the joint income they can afford to buy/build a big­ger property.

Others with low income they can afford a standard two-three bedroom house.

Concerns were raised at the Forum in Novotel, a few weeks ago, that valuers from Nadi were colluding with agents in Suva to undervalue the property. What is the Board doing to address this issue?

A valuer should never collude with an agent.

This is against the ethics of valuation pro­fession.

If any valuer is found to be in such practise then it should be brought to the attention of the Board.

The Board will take disciplinary action on that valuer.

(i) Is there a penalty for this?

A valuer can be warned, suspended or de­registered for such action.

Feedback: monica.aguilar@fijisun.com.fj

Report By:

Dr Abdul Hassan

Monica Aguilar



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