--- title: "Valuation Fundamentals" url: https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/ date: 2026-01-16 modified: 2026-09-06 lang: en author: "" description: "Technical Reference 36100  —  Valuation Fundamentals Components: 5 · Property Valuation (Technical) (36000) 1 Overview Node 36100 addresses the fundamental principles and core methodologies that underpin Australian property valuation practice...." word_count: 933 --- # Valuation Fundamentals Technical Reference ### 36100  —  Valuation Fundamentals Components: 5 · Property Valuation (Technical) (36000) 1 #### Overview Node 36100 addresses the fundamental principles and core methodologies that underpin Australian property valuation practice. Every valuation, regardless of property type or purpose, is built on a common set of definitional foundations — the meaning of market value, the valuation date, and the concept of highest and best use — applied through one or more of five recognised valuation methods selected according to the nature of the property and the market evidence available. The five core methods are the sales comparison, or direct comparison, method, which derives value from analysis of comparable sales; the income capitalisation method, which derives value from a property's income-producing capacity; the discounted cash flow method, which derives value from the present value of projected future cash flows; the cost, or summation, method, which derives value from the cost of land and improvements; and the hypothetical development method, which derives value from a feasibility analysis of a property's development potential. Each method is addressed in detail in its own subordinate node. This node serves as the foundational reference for parties seeking to understand how a valuation opinion is formed, before proceeding to the detailed methodology addressed in nodes 36110 through 36150. 2 #### Scope & Boundaries This node addresses the fundamental principles of market value, valuation date, and highest and best use, and provides an overview of the five core valuation methods. It does not address the detailed application of each method, addressed in nodes 36110, 36120, 36130, 36140, and 36150, nor the professional standards and registration frameworks governing valuation practice, addressed in node 36200. It does not address sector-specific valuation considerations, addressed in node 36300, nor the specific methodology applied in compulsory acquisition compensation, addressed in node 36500. Scope Note This node describes generally applicable valuation principles as at the time of writing. The specific method or combination of methods appropriate to a given property should be determined by a suitably qualified valuer having regard to the property type, purpose of the valuation, and available market evidence. 3 #### Key Concepts Market Value The estimated amount for which a property should exchange between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, reflecting the internationally recognised definition applied in Australian valuation practice. Highest and Best Use The reasonably probable and legally permissible use of a property that is physically possible, appropriately supported, financially feasible, and that results in the highest value, forming the analytical foundation for most valuation methods. Valuation Date The specific date as at which a valuation opinion is expressed, distinct from the date the report is prepared, and central to the selection of comparable evidence and market assumptions applied. The Five Valuation Methods The sales comparison, income capitalisation, discounted cash flow, cost, and hypothetical development methods, each suited to different property types and market evidence conditions, and frequently applied in combination or cross-checked against one another. Special Assumptions An assumption made by a valuer that departs from the facts existing at the valuation date — for example, that a development approval has been obtained — clearly identified and agreed with the instructing party, distinguishing the resulting value from an unqualified market value opinion. 4 #### Regulatory & Legal Framework - Valuation of Land Act State Valuers-General (state-based, for example the Valuation of Land Act 1916 (NSW) and equivalent legislation in other states) establishes the statutory basis for market value assessment for rating, land tax, and related statutory purposes. - API/IVSC Professional Practice Standards Australian Property Institute & International Valuation Standards Council Establish the definitional and methodological standards, including the market value definition, applied in Australian valuation practice. - Corporations Act 2001 (Cth) Australian Securities and Investments Commission Requires an independent valuation prepared to a defined standard in connection with related party transactions and other corporate dealings involving property assets. 5 #### Practical Application The method or combination of methods applied by a valuer reflects the property type, the purpose of the valuation, and the market evidence available at the valuation date. | Scenario | Application | Outcome | | -------- | ----------- | ------- | | A residential property is offered for sale and requires a pre-sale appraisal | The valuer applies the sales comparison method using recent comparable sales in the same locality | The appraisal informs the vendor's pricing strategy or a purchaser's due diligence | | A specialised income-producing asset, such as a hotel, is valued for refinancing | The valuer applies the income capitalisation or discounted cash flow method, reflecting the asset's income-producing capacity | The valuation supports the refinancing decision and lending terms | | A development site is assessed for acquisition feasibility | The valuer applies the hypothetical development method, addressed in detail in node 36150 | The resulting residual land value informs the acquisition price the developer can sustain | 6 #### Cross-Series References [ 36110 Sales Comparison & Direct Comparison Method The most widely applied method, deriving value from adjusted comparable sales evidence. ](/apn-codex/series-30000/series-36000/series-36100/series-36110/) [ 36120 Income Capitalisation Method Capitalises a property's net income at a market-derived rate of return. ](/apn-codex/series-30000/series-36000/series-36100/series-36120/) [ 36150 Hypothetical Development Method Derives a residual land value from projected development realisation less cost and profit. ](/apn-codex/series-30000/series-36000/series-36100/series-36150/) [ 32220 Residual Land Value (RLV) Analysis The comparable feasibility calculation applied by developers for acquisition decision-making. ](/apn-codex/series-30000/series-32000/series-32200/series-32220/) Findings are presented on the basis of data and evidence alone. Node Parameters Node ID36100 Series36000 Property Valuation (Technical) RegisterTechnical Reference Standard JurisdictionAustralia (all states & territories) StatusPublished In This Sub-Series - [36100Valuation Fundamentals](/apn-codex/series-30000/series-36000/series-36100/) - [36110Sales Comparison & Direct Comparison Method](/apn-codex/series-30000/series-36000/series-36100/series-36110/) - [36120Income Capitalisation Method](/apn-codex/series-30000/series-36000/series-36100/series-36120/) - [36130Discounted Cash Flow (DCF) Method](/apn-codex/series-30000/series-36000/series-36100/series-36130/) - [36140Cost & Summation Method](/apn-codex/series-30000/series-36000/series-36100/series-36140/) - [36150Hypothetical Development Method](/apn-codex/series-30000/series-36000/series-36100/series-36150/) Related Analytical Nodes - [30000Property Encyclopedia & Technical Guides](/apn-codex/series-30000/) - [31000Property Types & Sectors](/apn-codex/series-30000/series-31000/) - [32000Property Development & Construction](/apn-codex/series-30000/series-32000/) - [33000Property Investment & Finance (Technical)](/apn-codex/series-30000/series-33000/) - [34000Property Management & Operations (Technical)](/apn-codex/series-30000/series-34000/) - [35000Property Law (Technical)](/apn-codex/series-30000/series-35000/) - [37000Property & Casualty Insurance (Technical)](/apn-codex/series-30000/series-37000/) #### In this sub-series - [Cost & Summation Method](https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/series-36140/)- [Discounted Cash Flow (DCF) Method](https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/series-36130/)- [Hypothetical Development Method](https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/series-36150/)- [Income Capitalisation Method](https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/series-36120/)- [Sales Comparison & Direct Comparison Method](https://australianproperty.network/apn-codex/series-30000/series-36000/series-36100/series-36110/)