NewWorld Development Company Limited
FINANCIAL SECTION
160
16 INVESTMENT PROPERTIES
(continued)
Valuation techniques
Fair value of completed commercial, residential properties and carparks in Hong Kong and Mainland China is
generally derived using the income capitalisation method and wherever appropriate, by direct comparison method.
Income capitalisation method is based on the capitalisation of the net income and reversionary income potential
by adopting appropriate capitalisation rates, which are derived from analysis of sale transactions and valuers’
interpretation of prevailing investor requirements or expectations. The prevailing market rents adopted in the
valuation have reference to recent lettings, within the subject properties and other comparable properties.
Direct comparison method is based on comparing the property to be valued directly with other comparable
properties, which have recently transacted. However, given the heterogeneous nature of real estate properties,
appropriate adjustments are usually required to allow for any qualitative differences that may affect the price likely
to be achieved by the property under consideration.
Fair value of commercial properties, residential properties and carpark under development is generally derived using
the residual method. This valuation method is essentially a means of valuing the completed properties by reference
to its development potential by deducting development costs together with developer’s profit and risk from the
estimated capital value of the proposed development assuming completed as at the date of valuation.
As at 30 June 2015 and 2014, all investment properties are included in level 3 fair value hierarchy.
There were no changes to the valuation techniques during the year and there were no transfers between fair value
hierarchy during the year.
Information about fair value measurements using significant unobservable inputs:
Range of significant unobservable inputs
2015
Fair value
Valuation techniques Prevailing market
rents per month
Unit price Capitalisation
rate
HK$m
Completed investment properties
Hong Kong
Commercial
33,708.4
Income capitalisation
HK$14–HK$480
per square feet
N/A
1.6%–7.5%
Carparks
1,487.7
Income capitalisation HK$3,200–HK$5,600
per carpark space
N/A
4.5%–6.5%
Mainland China
Commercial
14,594.0
Income capitalisation
HK$29–HK$286
per square metre
N/A
3.0%–8.5%
Carparks
5,919.4
Direct comparison
N/A
HK$81,000–
HK$481,000
per carpark space
N/A
Residential
2,935.1
Income capitalisation
HK$11–HK$208
per square metre
N/A 4.0%–15.0%
Total
58,644.6
