Property Valuation Criteria and Methodology
In assessing property values, the Company follows internationally recognized valuation practices and complies with the regulations of The Valuers Association of Thailand. Property valuation is conducted under two main approaches: Market Value Basis and Non-Market Value Basis, as briefly described below.
Market Value Basis
This refers to the valuation of properties where sufficient market transaction data is available for comparison in determining the property’s market value.
Market Value refers to the estimated monetary amount for which a property should exchange between a willing buyer and a willing seller on the valuation date, under normal market conditions, in an arm’s-length transaction, after proper marketing, and where both parties act knowledgeably, prudently, and without compulsion. It is also assumed that legal ownership and possession of the property can be fully transferred.
Market Value generally excludes acquisition costs, fees, taxes, and other transaction-related expenses.
Non-Market Value Basis
This refers to the valuation of certain specialized properties for which there are few or no comparable transactions, or where insufficient market information is available to determine Market Value.
Examples of valuations under the Non-Market Value Basis include:
- Investment Value
- Value in Use
- Going Concern Value
- Insurable Value
- Assessed or Taxable Value
- Special Value
- Forced Sale Value
- Salvage Value
- Depreciated Replacement Cost
Property Valuation Methods
Three internationally recognized valuation approaches are commonly applied:
1. Cost Approach
The principle of the Cost Approach is that the value of an asset is related to the cost of acquiring or constructing a comparable replacement asset.
The method estimates the current replacement cost of the building, deducts depreciation based on age and condition, and adds the market value of the land to determine the overall property value.
This approach is commonly used for specialized properties such as factories. For residential developments, the Market Approach may be more appropriate.
2. Market Approach
The Market Approach determines property value by comparing the subject property with similar properties that have been sold or offered in the market.
The analysis takes into consideration factors affecting value, including:
- Location
- Zoning
- Land size
- Building usable area
- Building quality
- Other relevant property characteristics
Appropriate valuation techniques may include the Sales Adjustment Grid Method and Weighted Quality Score (WQS).
3. Income Approach
The Income Approach determines value based on the income-generating capability of a property and is suitable for income-producing properties.
The basic principle is that the current value of a property reflects the present value of its expected future net income.
The general process includes:
- Estimating income from all sources based on market comparisons and the property’s actual income.
- Deducting vacancy and bad debt allowances to determine effective income.
- Deducting operating expenses such as management costs, taxes, insurance, and maintenance to determine net income.
- Applying the formula: V = I / R
Where:
- V = Property Value
- I = Net Income
- R = Capitalization Rate or required rate of return
Two commonly used methods under the Income Approach are:
- Direct Capitalization
- Discounted Cash Flow (DCF)
Direct Capitalization is generally suitable for properties with relatively stable income, while Discounted Cash Flow is more appropriate where future income is expected to fluctuate according to market conditions.
DCF analysis may involve financial concepts such as Net Present Value (NPV), Internal Rate of Return (IRR), and Discount Rate.
Hypothetical Development Method / Residual Method
This method is generally used for vacant land or development projects that have not yet been completed.
The valuation considers the development potential of the property based on its Highest and Best Use, taking into account legal, financial, market, and physical factors.
The principle can be summarized as:
Project Value – Construction Costs – Other Development Costs = Land Value
Computer Assisted Mass Appraisal (CAMA)
CAMA is an application of the Market Approach that uses statistical models such as Multiple Regression Analysis (MRA).
It is commonly used for the mass valuation of hundreds or thousands of land plots, such as for land expropriation or land readjustment projects.
Reconciliation of Property Value
For standard properties, the Market Approach or Cost Approach may be sufficient.
For high-value or complex properties, all three principal valuation approaches or other advanced methods may be considered.
After applying the appropriate valuation methods, the valuer reviews each process and determines the reliability of the results. The final value conclusion is then reached by considering the relative weight of each approach together with the valuer’s professional experience and judgment.
Property Valuation Procedures and Internal Control System
1. Client Engagement
The Company provides valuation services to financial institutions by contacting departments responsible for collateral valuation.
Corporate and individual clients may also contact the Company directly or submit property information for a service quotation.
2. Preliminary Document Review
The Company reviews the completeness and clarity of documents required for each type of property valuation.
Examples include:
- Land: Land Title Deed, Nor Sor 3, Nor Sor 3 Kor, or other relevant title documents.
- Buildings: Building plans, House Registration, and building permits, where available.
- Leasehold Rights: Lease agreements and supporting documents such as location maps or title documents.
- Other documents: Registered sale and purchase agreements, ownership evidence, and financial statements for the previous 3–5 years where an Income Approach is required.
3. Verification of Title Documents and Legal Restrictions
The surveyor and valuer verify land title documents against official records maintained by the Land Office.
The review may include:
- Seizure or legal restrictions
- Encumbrances
- Expropriation projects
- Zoning and land-use restrictions
- Access and right-of-way
Where private access roads are involved, both legal and practical rights of access are considered.
4. Property Location and Physical Inspection
The Company verifies the location of the property using official cadastral maps, parent title documents, or subdivision plans obtained from the relevant Land Office.
The inspection includes both the property itself and its surrounding environment.
For land, the inspection may cover:
- Boundaries and shape
- Developed and undeveloped areas
- Excavated areas or ponds
- Existing buildings
- Current land use
- Highest and Best Use
- Availability of utilities
For buildings, the inspection is limited to visible conditions and does not include structural testing of foundations or concealed structural components.
The surrounding environment is also reviewed, including:
- Accessibility and transportation
- Traffic and density
- Commercial, industrial, residential, or agricultural characteristics
- Pollution and environmental disturbances
- Other factors that may affect property value
Relevant legal restrictions are also reviewed.
5. Market Data Collection
Surveyors and valuers collect market information from various sources, including property listings, brokers, relevant organizations, and other reliable sources.
The information is then submitted to the Valuation Committee for consideration.
6. Market Data Analysis
The Valuation Committee reviews and adjusts market information provided by the survey team.
Where information differs significantly, additional verification may be obtained from local bank officers, branch managers, or other reliable sources.
7. Valuation Methods
The Company applies internationally recognized valuation approaches, including:
- Market Comparison Approach
- Cost Approach
- Income Approach
8. Property Valuation Report
The Company’s standard valuation report generally includes:
- Purpose of valuation
- Summary of property details and value
- General valuation principles
- Valuation method applied
- Property details, development trends, and Highest and Best Use
- Verification of title documents and property location
- Transportation and accessibility
- Availability of utilities
- Comparable market data
- Definitions of Market Value and Forced Sale Value
- Valuation assumptions, conditions, and limitations
- Sources of market information and valuation methodology
- Detailed valuation of land and buildings
- Supporting documents and appendices
9. Valuation Approval
To ensure fair and reliable valuations and strengthen internal controls, the Company clearly separates survey and valuation responsibilities.
Surveyors are responsible for inspecting the property, reviewing its surroundings, verifying the location, collecting and checking documents, researching market information as of the inspection date, and preparing survey reports.
Surveyors do not have sole authority to determine the final valuation.
Final valuation approval is conducted by a Valuation Committee consisting of at least two members, including:
- One executive at Assistant Managing Director level or above
- One Valuation Department Manager
Financial Institutions and Organizations Served by the Company
- Krung Thai Bank Public Company Limited
- TMB Bank Public Company Limited
- Siam Commercial Bank Public Company Limited
- CIMB Thai Bank Public Company Limited
- Bank of Ayudhya Public Company Limited
- United Overseas Bank (Thai) Public Company Limited
- Thanachart Bank Public Company Limited
- TISCO Bank Public Company Limited
- Bangkok Bank Public Company Limited
- Government Savings Bank
- Bank of Thailand
- Islamic Bank of Thailand
- Standard Chartered Bank (Thai) Public Company Limited
- Small and Medium Enterprise Development Bank of Thailand
- Export-Import Bank of Thailand
- Thai Credit Retail Bank Public Company Limited
- Bangkok Thanatorn Finance Company Limited
- Phayathai Asset Management Company
- Bangkok Commercial Asset Management Company Limited
- Sukhumvit Asset Management Company Limited
- Thai Asset Management Corporation
- Provincial Electricity Authority
- Electricity Generating Authority of Thailand
- National Housing Authority
- Agricultural Cooperative Federation of Thailand
- Revenue Department Government Officers Savings Cooperative
- Electricity Generating Authority of Thailand Savings Cooperative
- Bank of Thailand Employees Savings Cooperative
- Khon Kaen University Savings Cooperative