Mass Appraisal Methods: An International Perspective for Property Valuers

Citation

Grover, R. (2009), "Mass Appraisal Methods: An International Perspective for Property Valuers", Journal of Property Investment & Finance, Vol. 27 No. 3, pp. 311-312. https://doi.org/10.1108/14635780910951993

Mass appraisal is a topic of increasing importance in valuation practice. It can be defined as being the systematic appraisal of large groups of properties in a standardised, usually computerised, way, in contrast to traditional hand‐crafted bespoke valuations of individual properties. Although it has been used in real estate taxation since the 1930s, the number of countries with mass appraisal tax systems has increased significantly since 1990. The recent growth in use of automatic valuation methods in areas as diverse as estate agency, mortgage valuations, and the setting of rents for social housing makes it important for valuers to be familiar with mass appraisal approaches. These developments make the publication of mass appraisal methods, as part of the Real Estate Issues series, extremely timely. The editors, Tom Kauko and Maurizio d'Amato, have brought together twelve essays that examine a wide variety of mass appraisal methods and have supplied an excellent introduction and conclusions. The style of the volume is rigorous whilst avoiding unnecessary jargon and mathematics so that those new to the subject can also benefit from reading it.

The mass appraisal methods themselves are grouped into two main categories. There are “orthodox” models, largely based on multiple regression approaches that are either hedonic price models or data‐driven statistical models. Examples include the Dutch “MarktPositie” system of automated valuations used by estate agents to assess the market value of houses. The second group of models are variously described in the book as “emerging” or “heretical” as they have been developed outside of the dominant multiple regression analysis approach. They include the use of artificial neural networks, fuzzy logic techniques, and rough set theory. The last introduces the notion of bounded rationality in which choices are constrained by the available information so that consumers, by choosing the best from a limited range of properties, satisfice rather than maximise by choosing the best possible outcome from an unconstrained range of options.

The collection contains two extremely valuable chapters dealing with the efficiency of the different methods and with data issues. In the first of these, most of the authors represented in the volume examine a number of data sets, each with their preferred method, which enables the technical merits of the different approaches to be compared and ranked. In the second, the editors examine the issue of property market efficiency and what this means for the data upon which mass appraisal systems depend. The consequences of a market not being efficient are explored, which enables the editors to discuss the implications of different institutional environments for mass appraisal rather than starting with the assumption that property prices are the product of an efficient market.

Two criticisms can be made of this excellent collection. It is a pity that a more wide‐ranging review of mass appraisal systems in current practice was not included. Perhaps inevitably as much of the literature and research is focussed on the mass appraisal of residential properties, there is not much discussion of their application to commercial properties. As this book is the product of a series of meetings between the authors, it is to be hoped that these meetings continue and that further outputs result.