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Investment Property Valuation  

Our Experience
China Merchants Holdings (International) Company Limited (00144.HK)
Yuexiu Property Company Limited (00123.HK)
Zhuguang Holdings Group Company Limited (01176.HK)
CC Land Holdings Limited (01224.HK)
Beijing North Star Company Limited (00588.HK)
Chongqing Iron & Steel Company Limited (01053.HK)

Fixed interest security, company stock and share, and investment property are three major traditional investment opportunities for a company. The stock exchange provides a freely-traded market for listed shares and interest securities such as government bond. Compare with other traditional investment opportunities, investment property lacks of centralised trading market. Due to imperfect knowledge of transactions in the market and problems on managing investment property, such as ownerships, rents and lease term negotiations, a comprehensive property valuation is important to estimate its fair value by considering different valuation factors and market circumstances.

Factors Affecting the Value of Investment Property

  • Physical characteristics and location
  • Market interest rate for mortgage loan
  • Property repair and maintenance
  • Ease for sales and purchases
  • Ease for transferability
  • Level of disposable income in local market
  • Property-related policies

 

What We Support
Our valuation specialists can deliver immediate and comprehensive valuation in accordance with the local and international accounting standards across all sectors including residential, commercial, industrial or other properties. Our valuers have worldwide valuation and professional designations which can fulfil clients' different needs.

For more information about our valuation and consulting services, please visit www.gca-valuation.com.

Valuation Needs of Investment Property
No matter residential, commercial, industrial or other properties which are held for rental earning and/or capital appreciation, those properties are accounted under HKAS40 Investment Property. HKAS40 requires the fair value of investment property shall reflect market conditions at the end of the reporting period. We act as a professional independent valuer in providing opinion of value in the valuation process.

In valuation, the best evidence of fair value is given by current prices paid for similar property in the same location and subject to similar lease and other contracts in an active market. If there is absence of current prices as evidence in an active market, we consider valuating the property with other methods, for examples:

(a) Fair values of investment properties under development are generally derived using the residual method with reference to the developer's earning potential by deducting development costs and risks from the proposed development as at the date of valuation; or

(b) Fair values of completed investment properties are generally derived using the income capitalisation method. This valuation method is based on reliable estimation of future cash flows, supported by the terms of any existing lease and other contracts, and (when possible) by external evidences.

Valuation Approaches and Methods for Property Valuation

Valuation approach Valuation method
Market approach Direct comparison method
Income approach Capitalisation method
Cost approach Depreciated replacement cost method

Application of Investment Property Valuation
Company A owns a commercial property in Beijing and appointed us to value real property interest for annual financial reporting purpose. Company A is a property development and investment company in Northern China.

Case Study

In determining the market value of real property interest, we valued the real property interest by income capitalisation method, where the amount of net rental payable during the residual period of lease was capitalised. Market rent was adopted for capitalisation of the property interest after the existing lease term.

Our valuation report has been prepared in accordance with generally accepted valuation procedures and in compliance with the requirements contained in the HKIS Valuation Standards published by Hong Kong Institute of Surveyors (HKIS). We provided opinion on the market value of the property for compliance of HKFRS, HKAS and other financial reporting standards.

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