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Cyclical capitalization and lag vacancy

Maurizio d’Amato (DICATECh, Technical University Politecnico di Bari, Bari, Italy)

Journal of European Real Estate Research

ISSN: 1753-9269

Article publication date: 7 August 2017




This paper aims to propose a new valuation method for income producing properties. The model originally called cyclical dividend discount models (d’Amato, 2003) has been recently proposed as a family of income approach methodologies called cyclical capitalization (d’Amato, 2013; d’Amato, 2015; d’Amato, 2017).


The proposed methodology tries to integrate real estate market cycle analysis and forecast inside the valuation process allowing the appraiser to deal with real estate market phases analysis and their consequence in the local real estate market.


The findings consist in the creation of a methodology proposed for market value and in particular for mortgage lending determination, as the model may have the capability to reach prudent opinion of value in all the real estate market phase.

Research limitations/implications

Research limitation consists mainly in a limited number of sample of time series of rent and in the forecast of more than a cap rate or yield rate even if it is quite commonly accepted the cyclical nature of the real estate market.

Practical implications

The implication of the proposed methodology is a modified approach to direct capitalization finding more flexible approaches to appraise income producing properties sensitive to the upturn and downturn of the real estate market.

Social implications

The model proposed can be considered useful for the valuation process of those property affected by the property market cycle, both in the mortgage lending and market value determination.


These methodologies try to integrate in the appraisal process the role of property market cycles. Cyclical capitalization modelling includes in the traditional dividend discount model more than one g-factor to plot property market cycle dealing with the future in a different way. It must be stressed the countercyclical nature of the cyclical capitalization that may be helpful in the determination of mortgage lending value. This is a very important characteristic of such models.



The authors are grateful to the comments of two anonymous referee of the review. Eventual mistakes are only the author’s responsibility.


d’Amato, M. (2017), "Cyclical capitalization and lag vacancy", Journal of European Real Estate Research, Vol. 10 No. 2, pp. 211-238.



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