Your property is worth what you think it is worth — until the bank valuer says otherwise. In Malaysia, the bank valuation determines your loan amount, not the SPA price. This single number can add tens of thousands of ringgit to your required cash outlay or save you from overpaying. Yet most buyers treat valuation as a formality. It is not.
Here is the mechanism: you agree to buy a property at RM 600,000. The bank sends a valuer. The valuer says it is worth RM 550,000. The bank lends you 90% of RM 550,000 — that is RM 495,000, not RM 540,000. You now need RM 105,000 in cash to cover the gap, not the RM 60,000 you budgeted. That extra RM 45,000 has killed more property deals than bad credit scores.
How Property Valuation Works in Malaysia
When you apply for a home loan, the bank orders a valuation from their panel of registered valuers. You do not get to choose the valuer. The bank chooses. The process follows a standard sequence.
Step 1: You submit your loan application with the SPA.
Step 2: The bank engages a valuer from their panel list. The valuer contacts you or your agent to arrange an inspection.
Step 3: The valuer inspects the property — measuring built-up area, checking condition, noting the floor level and facing (for high-rise), assessing the location, and photographing the unit.
Step 4: The valuer compiles a valuation report using the comparison method — analyzing recent transactions of comparable properties within the same area.
Step 5: The bank receives the report. The bank lends you a percentage of the lower of the valuation or the SPA price.
This last point is critical. The bank always takes the conservative figure.
Loan amount = Loan margin % x MIN(Bank valuation, SPA price)
If the valuation is higher than the SPA price, you benefit — your loan is based on the SPA price, and you effectively bought below market value. If the valuation is lower, you have a shortfall.
The Valuation Shortfall Trap
This is the scenario that catches buyers off guard. You have budgeted for a 10% downpayment. The valuation comes in 5% below SPA price. Suddenly your cash requirement jumps by 50%.
| SPA Price (RM) | Valuation (RM) | Loan @ 90% (RM) | Cash Needed (RM) | Extra Cash vs Full Valuation (RM) |
|---|---|---|---|---|
| 500,000 | 500,000 | 450,000 | 50,000 | 0 |
| 500,000 | 490,000 | 441,000 | 59,000 | 9,000 |
| 500,000 | 480,000 | 432,000 | 68,000 | 18,000 |
| 500,000 | 470,000 | 423,000 | 77,000 | 27,000 |
| 500,000 | 450,000 | 405,000 | 95,000 | 45,000 |
| 500,000 | 430,000 | 387,000 | 113,000 | 63,000 |
Key takeaway: A 10% valuation shortfall on a RM 500,000 property increases your cash requirement by RM 45,000 — nearly doubling what you need from RM 50,000 to RM 95,000. Always have a cash buffer.
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Worked Example: The Full Impact
Scenario: Ahmad agrees to buy a condo in Petaling Jaya for RM 650,000. He expects a 90% loan. Budget: RM 65,000 downpayment + RM 25,000 for legal fees and stamp duty = RM 90,000 total cash.
Valuation comes in at RM 600,000.
Loan = 90% x RM 600,000 = RM 540,000
Cash needed for property = RM 650,000 - RM 540,000 = RM 110,000
Add legal fees + stamp duty = RM 25,000
Total cash required = RM 135,000
Ahmad budgeted RM 90,000. He is short RM 45,000.
Options:
- Find the extra RM 45,000 — savings, family, EPF withdrawal
- Negotiate the seller down to RM 600,000 (aligned with valuation)
- Apply to a different bank whose panel valuer may assess higher
- Walk away — if the SPA has a loan rejection clause, he may get his deposit back
Option 2 is the most common resolution. Sellers facing a valuation shortfall often reduce the price because the alternative is the deal falling through entirely. But this only works if you have a good lawyer who drafted the right clauses into the SPA.
What Valuers Look At
Understanding valuation methodology helps you predict whether a property will value well — or not.
Primary Factor: Comparable Transactions
This is the single most important input. Valuers look at actual completed transactions of similar properties in the same area over the past 6-12 months. Not listing prices. Not asking prices. Closed deal prices from JPPH (Jabatan Penilaian dan Perkhidmatan Harta) records.
The comparison is based on:
| Factor | How It Affects Valuation |
|---|---|
| Same development/taman | Strongest comparison — same developer, same specifications |
| Unit size (built-up sqft) | Price per sqft is the core metric |
| Floor level (high-rise) | Higher floors = higher valuation (by 1-3% per floor for premium floors) |
| Facing/view | Unblocked view, lake/park facing adds 3-10% |
| Condition | Fully renovated vs original can differ by 5-15% |
| Tenure | Freehold vs leasehold — leasehold discounted 10-20% in some areas |
| Recency | Transaction from 3 months ago is weighted more than 12 months ago |
If there are few comparable transactions — new development, unique property type, rural area — the valuation becomes more subjective and potentially more conservative. Valuers default to caution when data is limited.
Secondary Factors
- Location: Distance to MRT/LRT, schools, hospitals, commercial areas
- Strata title status: Properties without individual strata titles may be valued lower
- Development age: Older developments with dated facilities may see depreciation
- Supply in the area: High unsold stock in the development can suppress valuations
- Market sentiment: In a downturn, valuers may apply broader discounts
How to Check Market Value Before Committing
Do not sign a booking form until you have a reasonable estimate of the market value. You do not need a formal valuation — you need comparable data.
Source 1: JPPH Transaction Data
JPPH (Jabatan Penilaian dan Perkhidmatan Harta / Valuation and Property Services Department) publishes quarterly property market reports and maintains a transaction database (NAPIC — National Property Information Centre). JPPH operates under the Ministry of Finance and is responsible for property valuation, market data collection, and regulating the valuation profession in Malaysia.
What you get: Actual transaction prices filed with the government. This is the most reliable source. The data has a 3-6 month lag because transactions take time to register, but it is factual.
Source 2: Property Portal Transaction Data
iProperty and EdgeProp publish transaction data for specific developments. Go to the development page and look for the "Transactions" tab. This data is sourced from JPPH but presented in a more user-friendly format.
How to use it: Filter by unit size similar to your target unit. Look at the price per sqft trend over the past 12-24 months. If the SPA price you are being asked to pay is significantly above the recent price-per-sqft range, expect a valuation shortfall.
Source 3: Agent CMA (Comparative Market Analysis)
Ask 2-3 agents for their opinion of market value. Good agents have access to recent transaction data and can provide a CMA — a document comparing your target property with recent comparable sales.
Caveat: The selling agent has an incentive to tell you the price is fair. Get opinions from agents who are not involved in the deal.
Source 4: Informal Valuation
Some valuers offer informal valuation services — a desktop assessment based on comparable data without a physical inspection. Cost: RM 100-300. Not as accurate as a full valuation but useful for screening.
Recommended approach: Before signing any booking form, check JPPH data and portal transactions. If the asking price is within 5% of recent comparables, you are likely safe. If it is 10%+ above, expect trouble at valuation stage.
Valuation Fees
The buyer pays for the valuation. Fees are regulated by BOVAEA under the Seventh Schedule (Rule 48) of the Valuers, Appraisers, Estate Agents and Property Managers Rules 1986.
| Property Value (RM) | Valuation Fee Rate |
|---|---|
| First 100,000 | 0.25% |
| 100,001 - 2,000,000 | 0.20% |
| 2,000,001 - 7,000,000 | 0.167% |
| 7,000,001 - 15,000,000 | 0.15% |
| Above 15,000,000 | Negotiable |
Minimum fee: RM 200-300 depending on the valuation firm.
For a RM 500,000 property:
First RM 100,000: RM 250
Next RM 400,000: RM 800
Total: RM 1,050
In practice, most residential valuations cost between RM 200-500 because banks negotiate bulk rates with their panel valuers. The fee is typically deducted from your loan proceeds — so you pay it indirectly rather than writing a separate cheque.
Can You Challenge a Low Valuation?
Yes, but the process has limits.
Option 1: Request a Second Valuer (Same Bank)
Some banks allow you to request a second valuation from a different panel valuer. You typically pay for the second valuation (RM 200-500). The bank may use the higher of the two valuations, or they may average them. Policy varies by bank. Ask before paying.
Option 2: Apply to a Different Bank
Each bank has a different panel of valuers. A property valued at RM 480,000 by Bank A's panel valuer might come in at RM 510,000 from Bank B's panel valuer. This is why applying to 2-3 banks simultaneously is smart — not just for interest rate comparison, but for valuation diversity.
Option 3: Provide Evidence
If you believe the valuation is wrong, ask your lawyer or agent to compile evidence of comparable transactions that support a higher value. Submit this to the bank's credit department. They can request the valuer to review. This rarely changes the outcome significantly, but a RM 10,000-20,000 revision is possible if the evidence is strong.
Option 4: Negotiate the SPA Price Down
If the valuation is genuinely lower than the SPA price, the market is telling you something. The property may be overpriced. Use the valuation as leverage to renegotiate. Many sellers will agree to reduce the price to match the valuation rather than lose the deal.
Valuation for Different Property Types
| Property Type | Valuation Complexity | Common Issues |
|---|---|---|
| Standard condo | Low — many comparables in same development | Floor level and facing create variance within same development |
| Landed terrace | Low-Medium | Renovations can be hard to value consistently |
| Semi-detached / Bungalow | Medium-High | Fewer comparables, more variation in land size and condition |
| Commercial shophouse | High | Income approach may be used (capitalization of rental income) |
| Agricultural land | High | Few comparables, subjective factors dominate |
| New launch (pre-completion) | N/A during construction | Valuation done at completion — developer pricing may not match market at that point |
Valuation and New Launches
For new launches, the valuation happens at different points depending on the financing structure.
During construction: The bank disburses progressively based on the developer's certified stages of completion. No full valuation is needed at this point — the bank relies on the SPA price and the developer's reputation.
At completion (VP): Some banks conduct a final valuation at VP. If the market has dropped since you signed the SPA 2-3 years ago, the valuation may come in below your SPA price. This creates a shortfall that you must fund in cash. This happened to many buyers during the 2018-2020 market softening.
Under-construction risk: You are locked into a price today. The valuation that matters is 2-3 years from now. If the market softens, you may face a shortfall at VP. Budget a contingency.
For Investors: Pre-Valuation Due Diligence
Professional property investors never sign a booking form without doing valuation homework first. Here is the process.
Step 1: Pull JPPH data for the target development. Identify the price-per-sqft range for the past 12 months.
Step 2: Calculate the SPA price per sqft. Compare to the JPPH range.
SPA price per sqft = SPA price / Built-up area (sqft)
JPPH avg price per sqft = Average of recent transactions / Built-up area
Variance = (SPA per sqft - JPPH per sqft) / JPPH per sqft x 100%
Step 3: If variance is above +5%, there is a real risk of valuation shortfall. Budget accordingly.
Step 4: Factor the potential shortfall into your cash-on-cash return calculation. Use our cashflow calculator to model the scenario.
| Variance from Comps | Risk Level | Action |
|---|---|---|
| -5% to +5% | Low | Proceed normally |
| +5% to +10% | Medium | Budget 5% extra cash as buffer |
| +10% to +15% | High | Strongly consider renegotiating price |
| Above +15% | Very High | Walk away — you are likely overpaying |
Key takeaway: The valuation is not an administrative formality. It is the market's reality check on the price you agreed to pay. Treat it as such. Do your own comparable analysis before signing, budget 5-10% extra cash as a valuation shortfall buffer, and apply to multiple banks for valuation diversity. The five minutes you spend checking JPPH data can save you RM 50,000 in unexpected cash requirements.
Valuation vs Asking Price vs Market Price
These three numbers are almost never the same. Understanding the difference prevents expensive confusion.
| Term | Definition | Who Sets It | Reliability |
|---|---|---|---|
| Asking price | What the seller lists the property for | Seller (often with agent) | Low — often inflated 5-20% above market |
| Market price | What the property would sell for in a fair transaction | Determined by supply/demand, recent comps | Medium — range, not a fixed number |
| Bank valuation | Registered valuer's formal assessment | Valuer based on comparables | High — but still an opinion, can vary between valuers |
The typical flow: Asking price > Market price > Bank valuation. Sellers list high. Market forces bring it down. Bank valuers are conservative. Your job as a buyer is to get the SPA price as close to the bank valuation as possible — that way your loan covers most of the purchase price and your cash outlay is minimized.
For a full walkthrough of the property buying process including how valuation fits into each step, read our step-by-step house buying guide. To understand the loan eligibility mechanics that determine your borrowing capacity, see our home loan calculator guide. And to model the cashflow impact of different valuation scenarios on investment properties, use our cashflow calculator.
For subsale transactions specifically, where valuation shortfalls are most common, our subsale process guide covers the negotiation strategies in detail.