Glossary
Property Valuation
Property valuation is the process of determining a property's market value, typically conducted by a bank-appointed registered valuer. Banks require valuations to approve housing loans, ensuring the loan amount does not exceed the property's true worth.
In Detail
In Malaysia, property valuations are governed by the Valuers, Appraisers and Estate Agents Act 1981. When you apply for a housing loan, the bank appoints a licensed valuer (Registered Valuer or Property Valuer) to assess the property's market value. The valuation process works as follows: (1) Buyer applies for a loan, bank orders a valuation report, (2) Valuer inspects the property (location, condition, size, age, amenities), (3) Valuer researches comparable sales (recent transactions of similar properties within 1–2 km), (4) Valuer applies one or more valuation methods: (a) Comparison Method — most common for residential properties; compares sale prices of similar units, adjusted for differences (floor level, facing, renovation), (b) Income/Investment Method — used for rental properties; calculates present value of future rental income (Net Income ÷ Capitalization Rate), (c) Cost Method — used for unique properties; estimates land value + construction cost - depreciation, (5) Valuer issues a report with the estimated market value, (6) Bank uses the lower of valuation or purchase price to determine the maximum loan amount. Example: You agree to buy a condo for RM800,000. The bank valuation comes back at RM750,000. The bank will lend 90% of RM750,000 (RM675,000), not 90% of RM800,000. You must cover the RM50,000 valuation gap (RM800K - RM750K) plus the 10% downpayment (RM75K) = RM125,000 out-of-pocket. Valuation fees are borne by the buyer and follow a gazetted scale: RM800 for properties up to RM100K, RM2,250 for RM500K–1M, RM3,800 for RM1M–2M. The fee is paid upfront when ordering the valuation. For buyers, key concerns: (1) Valuation shortfall — if the valuation is lower than the purchase price, you need extra cash to cover the gap. Negotiate with the seller to reduce the price, or walk away if you can't afford it. (2) Over-valuation risk — if the valuation is higher than the true market value (rare but possible if the valuer uses outdated comparables), you may overpay. Always cross-check valuations with recent sales data on PropertyGuru or EdgeProp. (3) Timing — valuations are valid for 3 months. If your loan approval takes longer, the bank may require a revaluation (additional fee).
Investment Impact
Accurate valuations protect buyers from overpaying and ensure banks lend responsibly. However, valuations are backward-looking (based on past transactions) and may not reflect future appreciation or market downturns. Sophisticated investors order independent valuations before making offers to avoid bidding wars that push prices above fair value. A 10% overpayment (RM80K on an RM800K property) requires 3–5 years of appreciation to recover.