Understanding new home valuations: How they work and why they matter

If you’re purchasing a new home - whether it’s a house and land package or off-the-plan - you’ll likely come across a property valuation during the finance process. In plain terms, a valuation is an independent assessment of a property’s market value, based on recent sales evidence and the details of what you’re buying.

This guide explains the valuation meaning for new home buyers, how a new home valuation is calculated, and what to do if your valuation comes in lower than your contract price.

What does “valuation” mean in real estate for new home buyers?

A property valuation is a professional assessment of a home’s market value at a specific date. For new homes, valuers may assess value in two ways:

• Land value - if construction hasn’t started, and/or
• As if complete value - what the home should be worth once finished, based on plans and inclusions

Your bank or lender uses the valuation to confirm the property is suitable security for your loan.

Why a property valuation matters when purchasing new

A valuation can impact how much a lender will approve and how much you’ll need to contribute upfront. It’s especially important for:

• Off-the-plan purchases, because the home isn’t built yet
• House and land packages, because land and build may be valued differently
• New estates, where there may be fewer settled comparable sales

How is a new home valuation calculated?

There’s no one-size-fits-all formula, but most residential property valuations rely on comparable sales, compiled in a valuation pack.

Comparable sales - the main method

Valuers compare your new home to recently sold properties that are similar in:

• Location and land size
• Home size and layout
• Bedrooms, bathrooms, car spaces
• Finish level and inclusions - flooring, stone benchtops, appliances, landscaping etc.

Then they adjust for differences to account for the above details.

As if complete valuation - for off-the-plan and house and land

If you’re buying before the home is finished, the valuer may assess it as if it’s complete, using:

• Building plans and floor area
• Specifications and inclusions schedule
• Upgrade list (if applicable)
• Contract and build description

Cost cross-check - sometimes used

In areas with limited comparable sales, a valuer may do a reasonableness check using:

• Land sales evidence
• Estimated build costs and allowances
• Depreciation (generally minimal for new builds)

What can affect your valuation result when buying new?

Even with similar homes, valuation outcomes can vary. Common drivers include:

• Recent comparable sales available at the time
• Market conditions - buyer demand, supply, interest rates
• Inclusions and upgrades, some add value; others are lifestyle-driven
• Timing between signing and completion - values can move

What if the property valuation is lower than the contract price?

A valuation can come in below your purchase price, particularly with off-the-plan homes or in a moving market. If the valuation comes in lower than the purchase price, your lender may reduce how much they’ll lend, meaning you may need to contribute a larger deposit.

To help reduce issues:

• Provide the full inclusions and specifications to your broker/lender
• Make sure upgrades are listed in writing
• Keep expectations realistic: not every upgrade increases market value

What it all comes down to for new home valuations

When purchasing new, valuation meaning is simple, it’s an evidence-based view of what the property is worth - either as land today or as complete based on your plans, inclusions and the local market.

Understanding how a property valuation works can help you plan finance, avoid surprises, and move forward with more confidence.

Disclaimer: Cedar Woods gives no warranty concerning the accuracy of the material or information displayed in this blog. Prospective buyers should make their own enquiries and rely on their own investigations and independent advice. All information in this blog is subject to Terms of Use accessible at www.cedarwoods.com.au/Terms-of-Use.