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Understanding property valuations

Price is an important factor in buying or selling a house which is why a property valuation is needed to determine the value of the property.

What is a property valuation?

A property valuation is an estimate of the value of a property. A property valuation report is usually part of the home loan application process.

Lenders will ask for a property valuation report from a certified valuer when you’re buying a house. If you’re selling, this can be helpful in deciding whether or not it’s the right time to sell the property.

This is also needed when you plan to refinance your loan, or use the equity in your home to buy a second property or finance your home renovation.

Property valuation vs market valuation

Take note that a property valuation and the market valuation of the property are two different things. A market valuation or appraisal is an estimate of the current price of the property in the market, usually done by a real estate agent. The value of the house is based on recent sales and market trends.

On the other hand, a property valuation is performed by a certified valuer where they consider the home’s value for a longer term. It is generally more conservative and is used by financial institutions to assess the value of the property to calculate how much money they can lend to you.

This is also different to a free property report, which provides details including estimated property value, market comparison and suburb information. 

Things that determine the value of the property

There are certain guidelines and policies valuers follow when valuing a property. These guidelines are set by the Australian Prudential Regulation Authority (APRA). Qualified property valuers determine the value of your property by assessing numerous factors, such as:

  • size and shape of the property
  • topography of the land
  • zoning
  • potential for development
  • location
  • number of rooms
  • age and condition of the house
  • fixtures and fittings
  • design and layout, and
  • other special features of the house

Other than the features of the house, a valuer will also consider current market conditions and the median property prices in the area. After assessment, the valuation report will be given to your lender.

If you’re thinking of buying a house or refinancing your mortgage, a property valuation report is a necessary requirement because the property is used as security against your home loan.

In the unfortunate event that you are no longer able to make your loan repayments, the lender may need to sell the property to pay back the loan.

About the article

As Australia's leading online lender, has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.