According to Australian valuation standards, what is the key difference between 'market value' and 'market price'?
Correct Answer
B) Market value is an estimate, while market price is what was actually paid
Market value is the theoretical amount a property should sell for under normal market conditions between willing parties, while market price is the actual amount paid in a specific transaction. Market price may differ from market value due to special circumstances, urgency, or imperfect market knowledge.
Why This Is the Correct Answer
Market value is an estimate of the price a property should fetch between willing, informed parties, while market price is the amount actually paid in a particular sale. The two can differ because of urgency, special buyers or incomplete information.
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An investment property generates annual rental income of $48,000. After deducting outgoings of $8,000, the net annual income is $40,000. If the appropriate capitalisation rate is 5%, what is the estimated value using the capitalisation approach?