Property valuation in Cyprus
Property valuation in Cyprus is a process done by a professional certified valuer, aiming to find the property’s market value and resulting in a formal report recognised by banks, insurers and other institutions.
DevelopersCyprus has been evaluating and helping people to sell their properties since 1982.
Property valuation report
In Cyprus, the property valuation report is prepared by a professional property valuer registered with the Cyprus Scientific and Technical Chamber (ETEK), the government body responsible for registering, licensing, and monitoring the engineering, architectural, and valuation professions, among other things.
Property valuers in Cyprus must also be members of the Cyprus Property Valuers Association (ΣΕΕΑΚ or CVA).
According to the CVA website, a professional property valuer in Cyprus “operates under the RICS appraisal and valuation manual (Red Book) which is now incorporated with the International Valuation Standards”. Professional property valuers in Cyprus hold degrees in the real estate sector and often postgraduate degrees.
CVA represents Cyprus as a member of TEGOVA, the European Group of Valuers’ Associations. TEGOVA emerged in 1997 from the former EUROVAL to create and spread harmonised valuation practice, education, and ethics standards. TEGOVA has a code of conduct to which all members must adhere. It also publishes reports where central terms, like market value, fair value, and special value, are defined.
What should be included in a property valuation report?
The report states the market value of the property.
TEGOVA defines market value as “the estimated amount for which the property should be exchanged on the date of valuation between a willing buyer and a willing seller acting independently after proper marketing wherein the parties had each acted knowledgeably, prudently and without being under compulsion”.
The property valuation report must be clear and have sufficient details to cover key areas.
Therefore, the report usually contains information about the location, physical details of the construction, description, address, land and size, the condition of the building or dwelling, zoning characteristics, and insurable value. Information about the title deeds might also be mentioned. It is also a good idea to mention anything that adds value to the property.
It will additionally include relevant documents, such as the cadastral plan.
Our property valuation services include:
- Meeting with the client to discuss the client’s purposes and needs
- Giving advice
- Visiting the property, collecting data and doing market research to prepare the report
DevelopersCyprus can help you with property valuation; just contact us.
Need help valuing your property?
Our certified valuer, Antonis, is ready to help you.
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Cyprus real estate valuations: procedures and methods
Typically, a real estate valuation will take into account:
- the broader market context, i.e. macroeconomic conditions and trends like interest rates and inflation, and,
- property and building specifications.
The valuer will visit the property and do significant market research.
The CVA website explains the procedure and methodology followed by the Department of Lands and Surveys (DLS) of the Ministry of the Interior when evaluating a property. This involves considering the property's physical and legal characteristics (type, area, planning zone, location) and the land and building value per square metre (comparative sales, DLS internal valuations, market survey).
Real estate valuation model
A professional valuer prepares a real estate valuation model, which consists of the methods, systems, techniques, and qualitative judgments that the valuer will use to estimate and document value (International Valuation Standards 2022).
When using or creating a valuation model, the valuer must record the model’s assumptions, limitations and risks associated with the assumptions. The assumptions, limitations and risks must be consistent with the scope of the valuation. The valuation model must comply with IVS standards regardless of type and other particulars.
Commercial real estate valuation
Commercial real estate valuation calculates the value of commercial property.
Commercial property, or real estate, is defined by sources like Investopedia as property used for business purposes to generate income. Commercial property is not used as living space and falls into six categories:
- Office
- Retail
- Industrial
- Multi-family (including apartments, high-rise buildings, walk-up, and housing communities of manufactured houses)
- Hotel (including resort, casino, boutique)
- Special purpose (property not within 1-5, such as amusement parks and special purpose facilities).
J.P. Morgan Chase & Co. explains that cost, sales comparison and income are the three main property valuation methods. They can be used for residential and commercial properties, though some methods are better for one type of property, some for the other.
Therefore, the proper method is determined case by case, sometimes depending on the valuer’s gut feeling. J.P. Morgan Chase & Co. notes that “commercial property valuation is an art. … Even the best data is still an estimate”.
Thus, property valuation methods fall into these categories:
- Cost approach. This process calculates the cost of the building (considering age, size, condition, and features). It adds the value of the land, which it estimates using sales of similar properties in the area.
- Sales comparison approach. Also called the “market approach,” this method determines a fair market value by looking at recently sold properties in the same area. The valuer adjusts the amount to account for differences in age, size, condition, improvements, etc.
- The income approach or “income capitalisation” estimates the property's value based on the income it generates.
- Other niche methods include, among others, the value per door (a simple tally used for apartments and condos) and the cost per rentable square meter.
Property appraisal vs valuation: is there a difference?
A property appraisal is an informal estimate given by the real estate agent and used as a guide to pricing. In contrast, property valuation is a formal, written report prepared by a licensed valuer and recognised by banks, insurance companies and other stakeholders.
Typically, real estate agents offer property appraisals as a free service and use them as a guide. On the other hand, the valuer charges a fee to do an in-depth and objective evaluation using comprehensive criteria. The valuer is legally responsible for the content of the report.
Neighbourhood assessment
The neighbourhood influences a property’s value. For this reason, a valuer will consider the neighbourhood when preparing their report. The valuer will visually inspect the area and collect data.
A neighbourhood analysis must be included in a valuation report for a typical mortgage provider, and it must consider boundaries, characteristics, and factors affecting value and marketability:
- Boundaries: find the legally recognised neighbourhood and municipal boundaries, outline east, west, south, and north, and which streets determine the area.
- Characteristics: types of structures, architectural styles, current land use (e.g., residential or commercial), street patterns and design, and typical plot sizes.
- Factors: neighbourhood proximity to employment and amenities, access to public transport, and environmental influences.
Other factors to consider are:
- Noise and pollution.
- Social considerations like demographics, income levels of residents, harmony, and growth trends.
- Political and government factors like taxes, planning, zoning requirements, building codes, and restrictions.
- The landscape.
- School areas.
- Safety and crime.
- The quality of utilities.
- Distance from shopping centres.
- Are the other buildings and homes in the neighbourhood maintained well?
- Is the community improving, stable or declining?
Things that can affect a home’s value
Various factors affect a home’s value, from age and maintenance to decoration.
- The neighbourhood is one of the biggest influences on a home’s value.
- So is location: proximity to employment and jobs, schools, shopping, entertainment, child-care and other amenities. Waterfront properties are usually the most sought-after.
- The size and appeal of the house matter: the amount of livable space, beds and bathrooms.
- Age and condition: newer homes and well-maintained older homes sell for more. Condition is critical, referring to foundations and structure, electrical work, plumbing, the roof, appliances, and other functional issues. The cosmetic appeal of the house also counts.
- The national and local state of the market, from interest rates and government regulations to the number of properties for sale in your area and the number of buyers.
Factors that negatively affect a home’s value include traffic (living near busy roads), noise and pollution, high area crime rates, poor maintenance, damage, the home being built on a flood plain, illegal extensions and/or improvements without permission, and over-decorating that reduces the house’s aesthetic appeal.
Reasons why you need to have a property valuation
Having a property valuation serves several purposes:
- You can sell the property at an appropriate price or charge accurate rent.
- Insurance, financing, mortgage (“loan justification”) and other legal or finance matters.
- Investing.
- Dispute resolution and other legal matters, such as dividing the property upon divorce.
- Inheritance issues.
- If you seek to rent as a tenant, you will know if the landlord is asking for a reasonable rent for the property.
Online property valuation
Online property valuation in Cyprus can provide a general estimate but lacks the accuracy and credibility of a professional valuer's report. It is useful for preliminary assessments but not accepted by banks or insurers for official purposes.
Any tool used for automatic valuation produces unofficial reports similar to property appraisals, which Cyprus real estate agents offer as a free service.
Valuation fees
In Cyprus, the CVA has an indicative rates list based on the property's value. For example, the report for property worth up to 250,000 euros costs 300 euros.
For property worth 250,001 euros to 1 million, it is 300 euros plus 0,1% of the extra amount (1 million euros minus 250,000) and so on.
You can see the complete list of indicative prices on the Association of Real Estate Appraisers of Cyprus website.
FAQs
- Property valuation report
- Our property valuation services include:
- Cyprus real estate valuations: procedures and methods
- Property appraisal vs valuation: is there a difference?
- Neighbourhood assessment
- Things that can affect a home’s value
- Reasons why you need to have a property valuation
- Online property valuation
- Valuation fees
- FAQs