Market analysis- How Important in Property valuation?
In any exercise of property valuation an analysis of the market is indispensable. The valuer must keep it in the background of his mind that the property to be valued is one of the commodities offered for sale or demanded amongst a number of competitive properties. The market analysis includes an analysis of the neighborhood where the property is situated as well as the region in the broader context of which several such neighborhoods are located.
How efficient is the real property market?
A market helps allocation of scares resources in an economy through the prices mechanism. The price acts as both an indicators and an incentive of demands and supply of goods and commodities I the market.
Thus the lack of knowledge of price, the personal, circumstances of the individuals buyers and the high dealing cost may cause price differences to prevail m different part of the same market causing market imperfection.
As described, prompts non- participation by a large number of seller thus again restraining competitions. So price formed may not be competitive market price but influenced by a monopolistic condition and eventually maintains an unduly high level.
The poor efficiency of the real property market however can be attempted to be improved. Experience suggests that the haziness of the knowledge of price can be overcome by using sophisticated valuation techniques, publication of data on sale analyses and market information and professional estate agencies.
Government initiative to minimize dealing cost by reducing stamp duties and other fee may help substantial influx of funds in the market where again competitive price may be formed.
In spite of various imperfections it has been held by property economists that property market cannot be grossly identified as an inefficient market.
Valuations Considered in Property uses.
The process valuation should invariably be accompanied by an attempt to view the asset in proper light so that the utility of an asset or property may be measured with due consideration of its existing use, probable alternative uses or expected future use in the foreseeable future. The urban lands are transacted mostly for residence, services and investment. Dealing in real estate for speculation are also common. When developed with building land imbibes potential for multiple uses, vizz., residential, commercial, mercantile, industrial, institutional, storage, congregational and impact on valuation.