| Acquisition Costs |
The total cost of acquiring an asset. This may include stamp duty, legal fees, building report, valuation fees, survey fees, and any other due diligence costs directly related to the acquisition. Generally allowed for in a discounted cash flow approach, but not in a traditional capitalised income approach. |
| Appreciation |
An increase in the property’s value over time due to factors such as market demand, improvements, or economic trends. |
| Base Value |
An asset’s cost plus any costs incurred on the asset since first held, less the decline in value of the asset up to the end of the prior year. |
| Capitalisation Rate |
A rate used to convert a property’s income into value, calculated as the ratio of net operating income to the property value. Commonly used in investment property valuation. |
| Capital Gains Tax (CGT) |
A tax on the profit realised when a property is sold for more than its purchase price. Valuers often provide assessments to determine the property’s value at the time of acquisition or disposal. |
| Certified Practising Valuer (CPV) |
A designation of the Australian Property Institute signifying the recipient has the required education and experience to undertake comprehensive valuations. |
| Cooling Off Period |
A short statutory period after the contract is made, during which the purchaser may cancel the contract unconditionally. Usually does not apply in the case of auctions. |
| Comparable Sales Method |
A property valuation approach where the valuer examines sales of similar properties in the area to estimate the value of the property in question. |
| Compulsory Acquisition |
Where an asset is acquired by a statutory authority through legislation, irrespective of whether an owner is willing to sell or not. |
| Depreciated Replacement Cost |
The replacement cost of a property minus depreciation, used when market comparisons are limited. |
| Discounted Cash Flow |
A valuation method that calculates the present value of expected future cash flows, discounted back to their value today. |
| Due Diligence |
An investigation of the legal, financial, and physical nature and characteristics, including the entitlements and liabilities attaching to and arising from a real estate asset or assets, usually for acquisition or compliance purposes. |
| Encumbrance |
A claim or liability on the property, such as a mortgage, lien, or easement, which can affect its marketability and value. |
| Equity |
The interest or value which an owner has in an asset over and above the debt against it. |
| Fair Market Rent |
The rent that would be fair for the particular landlord and particular tenant to have agreed under the lease in question having regard to all the circumstances relevant to any negotiations between them of a new rent from the review date. The test is largely subjective. ‘Fair market rent’ is considered to be different from ‘current market rent’ to take into account what is reasonable between the actual parties to the lease. |
| Fair Market Value |
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. |
| Gross Rent Multiplier |
A figure derived by dividing the price of a property by its gross rental income, used as a basic measure of rental property value. |
| Gross Rent |
The rental reserved or derived under lease or tenancy arrangement(s) where there is no further obligation on the tenant to pay any other property costs other than tenancy utilities and cleaning. |
| Income Approach |
A valuation method where the property’s value is determined based on the income it generates, commonly used for commercial or rental properties. |
| Improvements |
Any additions or alterations to a property that increase its value. When determining tax liabilities, valuers often assess the value of improvements separately from the original structure. |
| Land Tax |
A tax payable annually in respect of the beneficial ownership of land, the rate of which is determined by the assessed valuation. Usually based on unimproved value of land. |
| Market Rent |
The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion. |
| Market Value |
The estimated amount a property would sell for in the open market, which is important for property valuation and determining capital gains tax liabilities. |
| Net Operating Income |
The income from a property after operating expenses are deducted but before taxes and financing costs. |
| Net Rent |
The rent to the owner free of all outgoings (i.e. gross rent less all outgoings including Land Tax). |
| Obsolescence |
A loss in property value due to outdated features or changes in market preferences. This can be functional (e.g., inadequate floor plan) or economic (e.g., a declining area). |
| Replacement Cost |
The estimated cost at the date of valuation to replace or build the existing improvements to provide the same standard of utility and appointments, using the most comparable modern materials and construction methods. |
| Rent Review |
A review of the rent payable under a retail premises lease where the landlord and tenant have agreed in a lease for the rent to be reviewed. |
| Rental Yield |
The difference between the income you receive from renting out your property minus the overall costs of your investment. Often expressed as a percentage, and the higher the percentage generally means greater cash flow and higher return on investment. |
| Residual Land Value |
The value of land determined by subtracting development costs and a developer’s profit from the estimated value of a completed project. |
| Residual Value |
The value remaining after all expenses, including building costs and the developer’s profit, have been deducted from the projected value of the completed property. |
| Sales Comparison Approach |
A valuation method that uses the sale prices of similar properties as a reference point for the subject property’s value. |
| Stamp Duty |
A tax levied by state governments on the purchase of property, often a significant upfront cost when buying investment properties. |
| Subdivision |
Division by a land owner of all or part of a parcel of land into separate allotments (or sections), each with a separate title, in accordance with a ‘plan of subdivision’ approved by the planning authority. |
| Sub-Lease |
A contract whereby the whole or part of the property is let to another person, with the party letting being themselves a lessee. The obligations of the lessee are not, however, diminished. |
| Tenure |
The legal holding or ownership status of the property, such as freehold or leasehold, which can affect its value. |
| Title Search |
A review of public records to verify the ownership and legal status of a property, identifying liens, easements, or restrictions. |
| Unimproved Value |
A statutory concept of value used mainly for rating and taxing purposes, which envisages the land as being in its virgin state but enjoying the benefits of all external factors that influence the value at a given date. Now obsolete. The value of the land as if all existing improvements thereupon, including site works, had never been built or made, but regarding all other lands as in their current circumstances, including all improvements, roads, services, and amenities. |
| Vacancy |
Areas of buildings available for occupation. Space that is empty but unable to be occupied is not included in the calculation of vacancies and marketable stock. Vacant space is designated as being available either on a direct or sub-lease basis. |
| Vacancy Factor |
The percentage of total marketable stock that is vacant. The ratio of total vacancy to total rentable area, usually expressed as a percentage. |
| Valuation Date |
The specific date as of which a property’s value is assessed. This is critical for tax calculations, as property values can fluctuate significantly over time. |
| Valuation Report |
A formal assessment of a property’s market value, often required for financing, taxation, or sale purposes. |
| Yield |
The annual return on investment from a property, expressed as a percentage of its cost or current market value. |
| Zoning |
Government regulations that dictate how land can be used, which can impact property value and its potential for capital growth. |
