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Fair valuations of properties being built a challenging issue

I refer to the report “Property experts caution against reliance on computerised valuations” (April 8).

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Patrick Tan Choon Hong

I refer to the report “Property experts caution against reliance on computerised valuations” (April 8).

Among other things, the Singapore Institute of Surveyors and Valuers (SISV) warned the public that those relying solely on computer-generated “values” for their property transactions and decision-making do so “at their own risk”.

There is some conflict of interest here because the SISV is also in the business of providing property valuation services, among others.

While a computerised valuation cannot consider a particular property’s attributes in detail, it gives a fairly accurate indication of the property’s fair value based purely on past average transaction prices of similar properties within the development or locale.

The real challenges of property valuation are not so much with existing properties, but with new launches that are still under construction. During the property boom, developers would price their units above the prices of fairly new developments nearby.

The banks’ valuers would match the developers’ asking prices. In this instance, there is no site valuation or computerised valuation available, since there is no past transaction for the said development.

Even if computerised valuations could churn out reports for under-construction developments via comparisons with similar properties nearby, the valuation would not be as high as the asking prices. How then were the banks’ valuers able to match the asking prices?

With a bearish market now, we expect valuations to have fallen. Developer units, however, are still at high prices, which the banks’ valuers are matching.

As an independent body, the SISV should take the lead in providing a fair valuation of properties under construction.

If valuers continue to match developers’ asking prices, it would only result in prices hitting the roof in a short time during a bull market; in a bear market, valuation would take a long time to come down.

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