Real Estate Valuation Methods

Under the current Vietnamese Valuation Standards, real estate is valued using the three approaches set out in Circular No. 32/2024/TT-BTC of 16 May 2024 of the Ministry of Finance. Their application to real estate is governed by the Real Estate Valuation Standard issued with Circular No. 42/2024/TT-BTC of 20 June 2024. Depending on the property, the purpose of the valuation and the information available, the valuer selects suitable methods and normally uses at least two methods to cross-check the result.

1. Market approach

• Comparison method: estimates value from completed transaction prices, or asking and bid prices, of similar properties on the market, adjusted for differences in location, area, legal status, condition and timing. Typically used for residential land, houses and apartments that are actively traded.

2. Cost approach

• Reproduction cost and replacement cost methods: value buildings on the basis of the cost of constructing an identical building or one of equivalent utility, less physical, functional and external depreciation. The land use right is valued separately, usually by the comparison method. Suited to specialised buildings that are rarely traded.

3. Income approach

• Direct capitalisation method: converts one year of stable net income (for example rent) into value using a capitalisation rate.
• Discounted cash flow method: discounts expected future income to present value; used for properties with variable income such as hotels, shopping centres and office buildings.

4. Residual method

Used for property with development potential, such as project land or vacant land awaiting construction. Value equals the expected gross development value less total development costs (including a reasonable developer’s profit), discounted to the valuation date.

This page is a general introduction. In each engagement DTC applies the Law on Prices, Decree No. 78/2024/ND-CP and the Vietnamese Valuation Standards in force.