IBBI Land & Building key terms

The estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, where each acts knowledgeably, prudently and without compulsion.

The specific point in time at which the value opinion applies, reflecting market conditions, physical condition and legal status of the property as of that moment, not the date the report is signed or delivered.

A deal between parties who are independent, unrelated and each pursuing their own interest, with no collusion, duress or special relationship that could distort the price paid for the property.

The reasonably probable, legally permissible, physically possible, financially feasible and most productive use of a site that produces the highest present value of a property.

The ownership interest in land and anything permanently attached to it, including buildings, fixtures and the bundle of legal rights to use, occupy, transfer and exclude others from that physical asset.

An asset that cannot be moved without losing its identity or value, such as land, buildings and attached structures, distinguished from movable assets like plant, machinery and vehicles.

The set of legal entitlements attaching to property ownership, typically including the right to use, sell, lease, mortgage, gift, exclude others and bequeath, each of which may be separated and transferred.

Any claim, lien, charge, easement, restriction or liability attached to a property that may reduce its value or limit the owner's freedom to use or transfer it.

A legal right held by one party to use another party's land for a specific limited purpose, such as access, drainage or utility lines, without possessing or owning that land.

A formal legal document evidencing ownership of a property and recording the registered owner, the nature of the interest and any registered charges or restrictions affecting it.

Absolute ownership of land and buildings for an indefinite duration, giving the holder the right to occupy, use, transfer or bequeath the property subject to statutory and planning controls.

A right to occupy and use a property for a defined period under a lease, created by a landlord granting possession to a tenant in return for rent and obligations.

The loss in value of a building or improvement from any cause, commonly analysed as physical deterioration, functional obsolescence and external or economic obsolescence, measured against replacement or reproduction cost.

A reduction in property value caused by factors other than physical wear, such as outdated design, poor layout or changed neighbourhood conditions, classed as functional or external.

The rate used to convert a single year's net operating income into an indication of value, reflecting the market's required return and expectations of income growth or decline.

The income remaining from a property after deducting all operating expenses, vacancies and collection losses from gross rental income, but before debt service and income tax.

A market-derived ratio of sale price to gross rental income, used to indicate value quickly by multiplying a property's gross rent by the multiplier observed from comparable sales.

A valuation method that estimates value by analysing prices paid for similar properties, then adjusting for differences in location, size, age, condition, tenure and transaction date.

A method that estimates value by adding the current cost of replacing or reproducing the improvements to the land value, then deducting accrued depreciation from all causes.

The current cost of constructing a building of equivalent utility using modern materials, design and techniques, rather than replicating the original structure exactly.

The current cost of constructing an exact replica of the existing building using the same materials, design and workmanship, often used for heritage or specialised structures.

A valuation technique that estimates land or development value by deducting total development costs, including construction, fees, finance and developer's profit, from the completed project's gross development value.

The reward required by a developer for undertaking risk and effort in a project, usually expressed as a percentage of gross development value or total development cost in the residual calculation.

An income approach technique that divides a single year's stabilised net operating income by a market-derived capitalisation rate to arrive at an indicated value in one step.

An income approach technique that projects net cash flows over a holding period and discounts them to present value at a rate reflecting risk and the time value of money.

The estimated value of a property at the end of the explicit cash flow projection period, often calculated by capitalising the final year's income or by assuming a resale.

A method of valuing leased property by capitalising the contractual or market rent receivable under the lease, appropriate where the rent and lease terms are stable and reliable.

The amount that could reasonably be obtained from a sale completed within a restricted timeframe, where the seller is under pressure and marketing is limited, typically below market value.

A transaction driven by financial hardship, insolvency or legal compulsion, where the seller has limited bargaining power and the price may not reflect normal market conditions.

A valuation prepared as at a date in the past, using information that would have been available and market conditions prevailing at that earlier date, not today's data.

A valuation prepared for a lender to assess whether a property provides adequate security for a loan, focusing on sustainable market value and the risk of price decline.

The amount required to rebuild or replace a property after damage, typically excluding land value and often including demolition, professional fees and statutory compliance costs.

The value of a property to a particular investor based on that investor's own requirements, expectations and risk profile, which may differ from market value.

An item that was once movable but has become permanently attached to land or a building, such as built-in cabinets or plant, and is generally treated as part of the real property.

An increase in property value resulting from improvements, public works or changes in planning, which may be subject to recovery by authorities or shared with tenants under lease terms.

A periodic adjustment of rent under a lease to reflect current market levels or an agreed formula, affecting the income profile and hence the value of the leased interest.

A formal written document stating the valuation figure, the purpose, the basis and date of value, assumptions, limiting conditions, methodology and supporting analysis for the client.

The stated premise on which a valuation is prepared, such as market value, market rent, investment value or forced sale value, which determines the assumptions and method adopted.

A statement in a valuation report warning that market conditions are so abnormal or data so limited that the valuation figure is subject to a higher than usual degree of uncertainty.