Valuation company Malaysia provides valuation services to the public under licences issued by the Board of Valuers, Appraisers, Estate Agents and Property Managers (the Board). One of the mandatory requirements in the preparation of valuation reports is compliance with the Malaysian Valuation Standards (MVS).
The MVS is a form of subsidiary legislation issued by the Board under the legislative powers conferred by the Valuers, Appraisers, Estate Agents and Property Managers Act 1981. Copy of the MVS may be purchased from the office of the Board.
There are 19 standards contained in the MVS, and any departure from these standards by a valuation company Malaysia must be fully disclosed, explained, and justified. The MVS covers, among others, the following areas:
General valuation concepts and principles, qualification of valuers and conflict of interest, conditions of engagement, purpose of valuation, market value basis of valuation, bases of value other than market value, inspection and investigation, valuation approaches, valuation reports, valuations based on assumptions, valuations for financial reporting, valuation of biological assets, valuations for financing purposes, updated valuations, mass valuations for property-backed portfolios, valuation of plant, machinery, equipment and infrastructure, valuations for submission to insurance and takaful supervision by Bank Negara Malaysia, valuations for capital market requirements, valuations for rating purposes, and limiting conditions.
Below are some of the key and commonly referenced concepts under the MVS for your understanding:
Cost vs Price vs Value
Cost refers to the amount paid or incurred to acquire or create an asset, liability, or service.
Price is the amount asked, offered, or paid in a transaction.
Value is an economic concept representing the estimated amount for which an asset or liability is expected to exchange between a willing buyer and a willing seller under appropriate market conditions.
Market Value vs Forced Sale Value
Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing, where both parties have acted knowledgeably, prudently, and without compulsion.
Forced Sale Value refers to the amount that may reasonably be obtained from the sale of a property under compelled or distressed conditions that do not meet the criteria of a normal market transaction. It typically reflects an unwilling seller, inadequate marketing period, and disposal under compulsion or duress.
Marriage Value / Synergistic Value
This refers to the additional value created when two or more properties, assets, or interests are combined, resulting in a total value that exceeds the sum of their individual values. For example, three adjoining intermediate shop lots valued at RM1 million each may achieve a combined value of more than RM3 million if the larger consolidated space enables more profitable or higher-order commercial use.
Special Purchaser
A special purchaser is a buyer for whom a particular property has a unique or enhanced value due to advantages arising from ownership that would not be available to other market participants. For example, the owner of a front parcel of land may be a special purchaser for a landlocked rear parcel, as acquisition would provide access or development potential. Such a purchaser may be willing to pay a special value above the prevailing market value.
Valuation
A valuation is a written and reasoned opinion of the market value or rental value of an interest in property or business, prepared on a stated basis of valuation and subject to any assumptions or qualifications.
Qualification of Valuer
A person accepting instructions to carry out a valuation must be a registered valuer under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981. A registered valuer shall not act for two or more parties in the same matter unless prior written consent has been obtained from all parties concerned.
Conflict of Interest
Valuers must disclose any past, present, or foreseeable future relationship with the subject property or the client that may give rise to, or be perceived as, a conflict of interest. Any such conflict that becomes apparent after acceptance of the instruction must be disclosed immediately.
Purpose of Valuation
The purpose for which the valuation is undertaken must be clearly stated in the valuation report, as it determines the appropriate basis of valuation and helps prevent misuse of the report for unintended purposes or out of context.
Highest and Best Use
In determining market value, the valuer must consider the highest and best use of the property, being the most probable and legally permissible use that is physically possible, financially feasible, and results in the highest value. This may be the continuation of the existing use or an alternative use supported by market conditions. For example, a large parcel of land with an old detached house zoned for commercial development may be valued based on its development potential rather than its current residential use.
Approaches to Valuation
The three principal valuation approaches are the Market Approach, Income Approach, and Cost Approach, which include methods such as the Investment Method, Residual Method, Profits Method, and Discounted Cash Flow (DCF) Method.
Comparison Method
This method estimates value by comparing the subject property with similar properties that have been sold recently or are currently offered for sale in the same or comparable locations. Adjustments are made to reflect differences in characteristics, condition, location, and other relevant factors.
Investment Method
This method values a property based on its income-generating potential. The estimated annual rental income is reduced by ownership-related expenses to derive the net annual income, which is then capitalised using an appropriate rate of return to determine the capital value.
Cost Method
This method derives value by adding the value of the land to the depreciated replacement cost of the building and improvements. Land value is assessed by reference to comparable sales, while building value is based on current construction costs less depreciation for age, use, and obsolescence.
Profits Method
Used primarily for specialised properties, this method estimates value based on the net income derived from business operations. The adjusted net operating profit is treated as rental income and capitalised at an appropriate rate to determine the market value.
Residual Method
This method estimates the value of land by deducting total development costs, including construction costs and developer’s profit, from the anticipated selling value of the completed development. The balance appropriately discounted for the period of development is the residual land value.
Discounted Cash Flow (DCF) Method
This method determines value by projecting future cash inflows and outflows over the development or investment period and discounting them to their present value using an appropriate discount rate. The net present value represents the current market value of the subject property.
Valuation Report
A valuation report prepared by valuation company Malaysia must clearly communicate the valuer’s opinion, the basis of valuation adopted, any assumptions made, and the information relied upon. The report will typically include: executive summary, terms of engagement, interest to be valued, purpose of valuation, date of inspection, date of valuation, definition of market value / forced sale value / fire insurance value (if applicable), title particulars, location, description of the subject property, occupancy, services, assessment, planning control, method of valuation, evidences of value, opinion of value, and appendices / exhibits / annexures (where applicable).
Valuation Based on Assumptions
A valuation may be carried out by valuation company Malaysia based on reasonable and likely assumptions that have not been realised as at the date of valuation. For example, for a building under construction, an assumption may be made that the building will be completed in accordance with approved plans and certified fit for occupation by the relevant authorities.
Frequently Asked Questions
Q1: Can a registered valuer accept valuation instructions for a property in which he or his firm previously acted as a selling or purchasing agent?
A1: A registered valuer shall not accept instructions to value a property if he or his valuation company has been involved in the sale or purchase of the same property in the capacity of an agent within one year from the completion date of the transaction.
Q2: Who is authorised to carry out property valuations in Malaysia?
A2: Only registered valuers who are licensed under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 and operating through a valuation company licensed by the Board of Valuers, Appraisers, Estate Agents and Property Managers are authorised to prepare formal valuation reports for public and institutional use.
Q3: What is the purpose of the Malaysian Valuation Standards (MVS)?
A3: The MVS provides a uniform framework to ensure that valuation reports in Malaysia are prepared consistently, professionally, and transparently. It sets out the principles, methods, ethical requirements, and reporting standards that valuers must follow to ensure reliability and credibility of valuation opinions.
Q4: When should Market Value be used instead of Forced Sale Value?
A: Market Value is used for normal transactions, financing, financial reporting, and most legal and commercial purposes where a willing buyer and seller are assumed. Forced Sale Value is applied in situations involving compulsion or distress, such as foreclosure, liquidation, or court-ordered sales, where adequate marketing and normal market conditions are not present.
Q5: Can a valuation be relied upon for purposes other than those stated in the report?
A: No. A valuation report is prepared for a specific stated purpose, such as sale and purchase, insurance, or financial reporting. Using the report for any other purpose or by parties not identified in the report may be misleading and is generally not recommended without the valuer’s written consent.
Q6: What information should a property owner provide to facilitate an accurate valuation?
A: Property owners should provide relevant documents such as the title deed or strata title, approved building plans, layout plans, tenancy agreements (if any), recent assessment and quit rent receipts, and details of renovations or improvements. Complete and accurate information helps the valuer conduct proper inspections and prepare a reliable valuation.
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