How is Property Valued: Why You Should Know This?

In recent news, we learned that the Insurance Pension Commission (Ipec) is incorporating valuation methodologies from the Security and Exchange Commission (SECZ), which help determine fair buying or selling prices, maintain property value, accurately calculate taxes, and provide competitive rates for property owners. Hence, today's conversation centres on property values and the importance of knowing the value of your property.

Before assessing your property's value, first check the neighbourhood's house values to determine its worth. Valuation may be necessary for transferral purposes, mortgages, transferring property to children, or seeking security in a loan. Another reason is that you need your property valuation to pay your taxes. Property taxes include wealth tax, vacant land tax, ground rent tax, property tax, municipal tax, and so on, which must be paid to various government departments. These taxes are calculated using the property's estimated value. If an individual or organisation declares bankruptcy, their properties can be acquired through valuation, which determines the base price for the auction.

Key factors in determining property value

• The location.
• The age of the house.
• The size of the house.
• The condition of the house.
• Renovations.
• Renovation potential.
• The state of the market.
• Interest rates.
• Sales trends.
• The political situation.

Now that you have an idea of what factors determine the value of your property in Zimbabwe,. Let's look at a few  methods of evaluation.

Sales comparison Approach: The price of your property is also influenced by its location. For instance, a house in Chitungwiza will cost less than one in Harare. Another factor is whether the house being sold or bought has title deeds, which can determine the price too.

Cost Comparison Approach-It involves determining the cost of constructing a similar property from scratch, taking into account current labour and material expenses as well as other relevant costs. This approach is useful for newly built or extensively modified homes. However, it may not be suitable for older houses as it does not consider depreciation. 

Price per square metre: The entire amount of accessible space is taken into account when determining value in real estate appraisals. It is critical to benchmark within the same submarket because property values can differ significantly between markets. Price per square metre can vary dramatically between Harare and Norton, and potentially even between different neighbourhoods within Bulawayo. A house in a certain city can be $65 per square metre, also because it is in a gated community and has access to  water and a sewage system, for example.

Investment Approach-The market value of a leasehold interest in real estate is determined by assessing its potential for generating future income. This method applies to properties where tenants pay rent to the landlord as a return on their investment. Valuers analyse similar property transactions, such as sales and rentals, to determine revenue. The resulting profit reflects the property's current value and is combined with future rental income.

Now let's assess the impact these changes have. Typically,  new evaluation methods are designed to improve the accuracy and reliability of asset evaluation. Therefore, only time will let us know if the evaluations actually work.  They definitely will affect how well properties are valued and will affect prices, buyer interest, and market dynamics. 

In terms of prices  the model should lead to a more accurate valuation, which can be tricky because of corruption. Other issues that could still arise would have the multicurrency faucet used in the country, so hopefully this new approach addresses that. If the pricing evaluations are accurate, they will definitely affect supply and demand.

In terms of buyer interest  depending on the result of the new methods , buyers would either be more or less interested in buying property, which would impact sales and prices. Selling prices will also be an issue.

As you can see, these changes could have a ripple effect on the real estate market, so you need to keep an eye out for updates for when the time comes when you want to buy or sell property.