Evaluation value is not equal to the actual purchase price
The top of the mountain Wenhui Road, the flow of the standard, out of the market unexpected. The Government stated that the developer’s bid price was much lower than the internal assessment of the Lands Department and decided to take back the land without selling the land.
The incident reminds the author of the difference between the evaluation value and the actual purchase price when the assessment is to be made at the beginning of the year. The valuation value is the appraiser’s valuation of the property, which assumes that there is no special circumstances affecting the price decision between the buyer and the seller. The actual bid-ask price is a price decision made by the buyer and the seller in consideration of their particular circumstances, so it is not unusual for the assessment result to differ from the actual bid-ask price. For example, the estimated value of a residential unit is 30 million yuan. If the owner is eager to cash out, there are buyers who can trade in cash in a short period of time. The owner may be willing to sell the property for 25 million yuan.
The land for the tender is not easy to assess. Generally, it is best to use the recent transaction price of similar land for direct comparison. However, the location of Wenhui Road is distinguished and the area is very wide. There is no similar land transaction for reference. The appraiser only uses the residual method to evaluate the land, which is to estimate the amount of money that can be sold after the completion of the project, and then deduct the construction cost, interest expenses, other development costs and developer profits, etc., to obtain the land value. The weakness of this method is that it involves many parameters, and any one of the parameters is inaccurate, which will seriously affect the reliability of the evaluation results.
Wenhuidao Land can be built with a floor area of about 400,000 square feet, with no unit area or quantity restrictions. If each unit has a building area of 4,000 square feet, the project can provide about 100 units. The unit price is conservatively estimated at 80,000 yuan, calculated at a practical rate of 90%, and the selling price of each unit is not less than 300 million yuan. Even in the case of a hot market, it is difficult for developers to find 100 richest people to buy 300 million yuan each year. Even if resale is a rent, it is easy to find a hundred or ten tenants who are willing to pay hundreds of thousands of yuan a month. The pressure of vacant tax, the recent trend of interest rates and the development of Sino-US trade wars, the government’s determination to reclaim land, and the huge amount of project investment, the conservative bids of developers are taken for granted.
The largest developers in the city have participated in the tender, which proves that they are not bearish, but the bid must reflect the risk factors of the project and future market changes. High-quality land has always been extremely popular, saying that the major developers are colluding to suppress prices, which is really a fantasy.
According to the author’s understanding, the Lands Department will evaluate the land on the morning of the tender closing. If the maximum price is higher than the assessed value, the land can be sold smoothly; but if the highest price is less than the assessed value, the land must be recovered and flowed. In the past, when the developers of the Mainland still actively participated in the bidding for government land, the situation in which the head bid was higher than the Lands Department’s valuation was high. The Lands Department was still willing to accept the highest bid as the buyer. Land assessment is not a science, it involves the individual professional judgment of the appraiser, and it is not surprising that the assessment results are significantly different from the market transaction price. But why does the Lands Department only accept the highest price than its internal assessment and cannot accept the lower price than its internal assessment? Can the Lands Department ensure that when the land is re-tendered in the future, the entry price must be higher than the highest bid price of the previous bid? If not, who will bear the deadweight loss of the Treasury? After the bidding of the land in the past few times, the bidding can be successfully sold. It is not difficult to check the records to see if the second bidding sells the land at a higher price.
The author believes that relying on the internal assessment of the Lands Department to check whether the land is recovered has certain risks, and it also makes the officials responsible for the assessment intangible pressure and unfair to them. Because land evaluations often have no objective criteria, it is difficult to determine whether the assessment results are excessively aggressive or excessively conservative, and the price of the major developers should fully reflect their views on the market. Blindly believe that the results of the assessment lead to the flow of the standard is not scientific, it can also lead to loss of the warehouse. The Government should review the mechanism for assessing whether the entry price is acceptable.