Objectives And Methods of Real Estate Evaluation in The Turkish Real Estate Market
Evaluation in the real estate market means valuing the property at a specific date. Real estate evaluation is one of the most important areas that newcomers to the real estate market should be aware of, and in particular, the promising Turkish real estate market, which has been booming in recent years and is attracting real estate investors. Worldwide, however, real estate investment in Turkey is a diversified investment, with returns increasing as the risk increases.
Therefore, turkey real estate investment opportunities depend mainly on the quality of the investor and the extent of risk and expectations of return on investment, including the investor determines the feasibility of investing in real estate, as investment in real estate in Istanbul has an impact on other economic activities.
Therefore, it is imperative for the real estate investor to be familiar with all aspects of real estate valuation, which include the reasons for the rise or decrease in the value of a particular property, the objectives of real estate valuation, types of real estate values and methods of real estate valuation, and all the factors affecting the value of the property, You can also read more about the Real Estate Valuation Law for Foreigners in Turkey through this blog.
Reasons for the rise or decrease in real estate value:
The real estate value increases periodically for several reasons, including improving infrastructure, economic growth, increasing cash flows from the property, capital improvements in the property, the positive impact of inflation, the impact of supply and demand in the real estate market, adjustments and decorations in the property, and the announcement of new renovations and features.
The reasons for the decline in real estate value are due to the forced sale of the property, the absence of continuous maintenance, the conditions of supply and demand in the real estate market, economic obsolescence, the change of government laws, the adverse impact of infrastructure, or the deterioration of the conditions of the area in which the property is located.
Factors affecting the value of real estate:
Natural factors: where the environment has a direct impact on the value of the property.
Economic factors: where the value of real estate is linked to economic cycles.
Laws, regulations and legislation: where the value of real estate is affected by laws, regulations and legislation relating to construction, demolition, rents, licenses, privatization and other factors.
Economic and social conditions: such as average income, public taste and other factors that have an impact on the valuation of real estate.
Prediction: where future prices are related to the expected benefits of the property in the future.
Change: where the value of the property changes by the impact of various factors, as the real estate market is changing over time and according to future changes.
Alternatives: where property values change in terms of opportunity cost.
Supply, demand and competition: where property values are affected by the supply and demand in the market.
Equilibrium: where real estate prices in different regions are balanced according to factors of production.
Location: where property values are affected by the location and total area of the property.
Return: Where the price of the property is affected by rental returns.
Objectives of the evaluation in real estate investment:
Determine the price requested by the seller.
Help the buyer to determine the fair price of the purchase.
Determine the value of a particular property as part of an estate or shareholding in a company.
Determine the relative value of properties exchanged between different parties.
Determine the value of mortgage financing which is usually a percentage of the market value of the property.
Determine the rent of the property as a percentage of its value.
Determine the amount of insurance required on the property.
Determine the cost of defects in establishing a property as part of a process of litigation or compensation.
Determine property losses due to fire, storms or earthquakes.
Property valuation for tax calculation.
Determine real estate taxes when selling property.
Property valuation during multi-party issues.
Determine the value of future expansions, or specific decorations.
Determine whether or not the demolition of the property for better reuse.
Determine whether the current use of property is the best use.
Valuation of the property to determine its fair values as an real estate in Istanbul for investment building in the financial statements.
Types of real estate values:
Market value: The estimated value of a property in an open and competitive market.
Selling price: The price at which the actual sale is made, which differs from the market value up or down. The sale price is influenced by the willingness of the seller or buyer to complete the transaction within a period of time.
There are other types of values such as: cost, investment value, invoice value, insurance value, fair value, liquidation value.
Real estate evaluation methods:
Method of calculating the cost of construction (replacement value): It is the statement of the value of building a similar property at current market prices, and then subtracts the decrease in value as a result of depreciation, plus the value of the site as if it were empty.
Previous sales method: This method is based on current market prices for the sale of other properties, within a similar comparison of the property under evaluation, with appropriate adjustments by deducting the value of the items representing an advantage in the comparative property, and adding the value of the items that represent an advantage of the property to be evaluated until the value Real Estate.
Income capital method: the process of converting the expected future income from the property to the value of converting income into capital with reliance on the expectation principle for the future benefit of the property, where the value is equal to the amount that the buyer accepts to pay for the property value, which is the present value of all future cash flows, Future cash flows are then discounted to their present value.
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