Real estate market dynamics during capital market imbalances
Abstract
Purpose
The major purpose of this paper is to refocus the appraisal profession on estimating value rather than explaining price. The appraisal profession itself encompasses many disciplines of valuation beyond real estate, and transcends disciplines such as economics, the construction trades, business, finance, law, government, statistics, mathematics, geography, geology, mapping, and information sciences.
Design/methodology/approach
This paper describes how rapidly changing capital market conditions greatly affected transaction prices for real estate when underlying economic fundamental values of these properties remained unchanged. As such, differences between transaction prices and underlying economic value can be determined when capital markets rapidly expand or contract.
Findings
Most of the concepts, methods, processes, and techniques that appraisers use today are the direct result of studies performed within the academic community and most often from some other related field of study, rather than from pure valuation research itself. This is where the problems with which one is living today have erupted.
Originality/value
Property values and transaction prices are two very different beasts: value is a concept, whereas price is a reality. Appraisers have somehow forgotten that the price paid for real estate can be quite different from the value of that same parcel of real estate.
Keywords
Citation
Hamilton, T. (2011), "Real estate market dynamics during capital market imbalances", Journal of Property Investment & Finance, Vol. 29 No. 4/5, pp. 359-371. https://doi.org/10.1108/14635781111150295
Publisher
:Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited