Which valuation method is most common for HDB flats and condos?

The comparison (market) method. The valuer adjusts recent sales of similar units for time, floor level, size, condition, remaining lease and location, adjusting a comparable up where the subject is better and down where it is worse. It works because HDB and condominium markets have plenty of comparable sales.

How does the capitalisation rate affect value in the investment method?

Value = net annual income ÷ cap rate, so a higher cap rate produces a lower value. $59,000 of net income is worth $1,180,000 at 5% and $1,475,000 at 4%. The reciprocal of the cap rate is the Years' Purchase: 20 at 5%, 25 at 4%.

Can a property salesperson value a property?

A salesperson may give a market appraisal to help a seller set an asking price. Valuing or appraising land for a fee or reward makes a person an appraiser, who must be licensed under the Appraisers Act 1906; estate agency registration does not extend to it.

What is the difference between market value and reinstatement value?

Market value is the price in an arm's-length sale between a willing buyer and a willing seller. Reinstatement value is the cost of rebuilding the building, excluding the land, and is the figure used for fire insurance. A property can have a market value well above or below its reinstatement value.

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Paper 1 · Real Estate Market & Government Intervention · 11 min read

Property Valuation: The 5 Methods (with worked examples)

Practise this section (115 questions) → · 1.1 Real estate market and submarkets, in sets of about 30

Must-know for the exam

Valuing land for a fee needs an appraiser's licence under the Appraisers Act 1906; a salesperson gives a market appraisal, not a valuation.
Market value is an arm's-length price between willing parties; forced-sale value is lower; reinstatement value is rebuild cost excluding land; Annual Value is IRAS's rent estimate.
The comparison method dominates HDB and condo valuation: where the subject is better, adjust the comparable's price up; where worse, down.
Investment method: value = net annual income ÷ cap rate, or net income × Years' Purchase (1 ÷ yield): $59,000 at 5% is $1,180,000.
A higher capitalisation rate gives a lower value for the same income; capitalise net income, never gross, and leave loan interest out.
Cash-on-cash return = cash flow after full mortgage instalments ÷ total cash put in; gross and net yields leave financing out.
Residual method: land = GDV − costs − profit, e.g. $50m − $30m − $8m = $12m; any Land Betterment Charge is a cost (from 1 Aug 2022).
The profits method values trade property such as hotels and cinemas from the business's maintainable profit, where no comparables or market rent exist.
Highest and best use is tested in order: legally permissible, physically possible, financially feasible, then most productive.
Gearing lifts return on equity only while the net yield exceeds the borrowing rate; CAGR = (end ÷ start)^(1/years) − 1, not total gain ÷ years.

On this page · 9 sections

Valuation questions in Paper 1 test three things: which method suits which property, the arithmetic of the investment and residual methods, and the principles that explain why a figure moves. A fourth point sits underneath them all and catches salespersons in practice: who is allowed to value, and on what basis of value.

Who values, and on what basis

Anyone who values or appraises land or an interest in land for a fee or reward is an appraiser and must be licensed under the Appraisers Act 1906 (ss 2 and 4, sso.agc.gov.sg, read 1 Oct 2026). A salesperson's registration does not cover it. What a salesperson gives a seller is a market appraisal: an informed view of what the property might fetch, used to set an asking price. A valuation is a licensed valuer's opinion of value on a stated basis and date, in a report a lender or court can rely on.

Basis	What it measures	Used for
Market value	The price in an arm's-length sale between a willing buyer and a willing seller, after proper marketing, neither under compulsion	Sale, mortgage lending, most valuation reports
Forced-sale value	A lower figure reflecting a compressed selling period	Mortgagee sales, some auctions
Reinstatement value	The cost to rebuild, excluding land	Fire insurance
Annual Value	IRAS's estimate of the gross annual rent if let, excluding furniture and maintenance	Property tax

One property, several values. Each answers a different question, so never quote one for another's purpose.

A related-party sale (to a relative, or between companies under common control) is not at arm's length, so a valuer sets it aside as a comparable. And a purchase price is a historical fact, not a value: what an owner paid, or spent on renovation, does not decide what the market will pay now.

The five methods at a glance

Method	Best for	Core idea
Comparison (market)	Homes and other property with an active market	Adjust recent sales of similar properties for every material difference
Investment (income)	Let property: shops, offices, tenanted units	Value = net annual income ÷ capitalisation rate
Cost (contractor's)	Special-purpose property that rarely trades (schools, places of worship)	Land value + depreciated replacement cost of the buildings
Residual (development)	Development and redevelopment sites	Gross Development Value − development costs − developer's profit = land value
Profits (accounts)	Property valued for the trade in it (hotels, cinemas, petrol stations)	Capitalise the part of the business's sustainable profit attributable to the property

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A shop lets at $72,000 a year and the landlord pays $13,000 of outgoings. What is its value at a 5% cap rate?Show answer
$1,180,000. Net income = $72,000 − $13,000 = $59,000; at 5% the Years' Purchase is 20, so $59,000 × 20. Capitalise net income, never gross.
In the comparison method, which way is a comparable adjusted when the subject property is better?Show answer
Up. Adjust the comparable's price up where the subject is better and down where it is worse. A sale in the same development is the best evidence because it removes the biggest adjustments.
GDV is $50m, development costs $30m and required profit $8m. What is the residual land value?Show answer
$12m. Working: $50m − $30m − $8m. The developer's profit is treated as a cost of the appraisal, not a share of the residual.
Who may value land for a fee or reward?Show answer
Only an appraiser licensed under the Appraisers Act 1906. A salesperson may give a market appraisal to help set an asking price, but salesperson registration does not cover valuing for a fee.
Which return measure brings the mortgage instalments into the calculation?Show answer
Cash-on-cash return: (rent − outgoings − full mortgage instalments) ÷ total cash put in. Net yield leaves financing out, because it measures the asset, not the loan.

Common questions

Which valuation method is most common for HDB flats and condos?: The comparison (market) method. The valuer adjusts recent sales of similar units for time, floor level, size, condition, remaining lease and location, adjusting a comparable up where the subject is better and down where it is worse. It works because HDB and condominium markets have plenty of comparable sales.
How does the capitalisation rate affect value in the investment method?: Value = net annual income ÷ cap rate, so a higher cap rate produces a lower value. $59,000 of net income is worth $1,180,000 at 5% and $1,475,000 at 4%. The reciprocal of the cap rate is the Years' Purchase: 20 at 5%, 25 at 4%.
Can a property salesperson value a property?: A salesperson may give a market appraisal to help a seller set an asking price. Valuing or appraising land for a fee or reward makes a person an appraiser, who must be licensed under the Appraisers Act 1906; estate agency registration does not extend to it.
What is the difference between market value and reinstatement value?: Market value is the price in an arm's-length sale between a willing buyer and a willing seller. Reinstatement value is the cost of rebuilding the building, excluding the land, and is the figure used for fire insurance. A property can have a market value well above or below its reinstatement value.

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Study material aligned to the public CEA syllabus. Not financial or legal advice — verify current figures with the relevant authority (IRAS, HDB, CEA, MAS).