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Article
Publication date: 27 August 2019

Rotimi Boluwatife Abidoye, Ma Junge, Terence Y.M. Lam, Tunbosun Biodun Oyedokun and Malvern Leonard Tipping

Improving valuation accuracy, especially for sale and acquisition purposes, remains one of the key targets of the global real estate research agenda. Among other recommendations…

1909

Abstract

Purpose

Improving valuation accuracy, especially for sale and acquisition purposes, remains one of the key targets of the global real estate research agenda. Among other recommendations, it has been argued that the use of technology-based advanced valuation methods can help to narrow the gap between asset valuations and actual sale prices. The purpose of this paper is to investigate the property valuation methods being adopted by Australian valuers and the factors influencing their level of awareness and adoption of the methods.

Design/methodology/approach

An online questionnaire survey was conducted to elicit information from valuers practising in Australia. They were asked to indicate their level of awareness and adoption of the different property valuation methods. Their response was analysed using frequency distribution, χ2 test and mean score ranking.

Findings

The results show that the traditional methods of valuation, namely, comparative, investment and residual, are the most adopted methods by the Australian valuers, while advanced valuation methods are seldom applied in practice. The results confirm that professional bodies, sector of practice and educational institutions are the three most important drivers of awareness and adoption of the advanced valuation methods.

Practical implications

There is a need for all the property valuation stakeholders to synergise and transform the property valuation practice in a bid to promote the awareness and adoption of advanced valuation methods, (e.g. hedonic pricing model, artificial neural network, expert system, fuzzy logic system, etc.) among valuers. These are all technology-based methods to improve the efficiency in the prediction process, and the valuer still needs to input reliable transaction data into the systems.

Originality/value

This study provides a fresh and most recent insight into the current property valuation methods adopted in practice by valuers practising in Australia. It identifies that the advanced valuation methods could supplement the traditional valuation methods to achieve good practice standard for improving the professional valuation practice in Australia so that the valuation profession can meet the industry’s expectations.

Article
Publication date: 17 October 2016

Rotimi Boluwatife Abidoye and Albert P.C. Chan

The emerging trend in the global real estate valuation practice has led to the development of advanced valuation approaches to replace the traditional methods. The purpose of this…

1051

Abstract

Purpose

The emerging trend in the global real estate valuation practice has led to the development of advanced valuation approaches to replace the traditional methods. The purpose of this paper is to investigate the extent to which real estate valuers practicing in Nigeria are aware and use these advanced approaches in real estate valuation practice.

Design/methodology/approach

Both traditional and advanced approaches were identified from the literature. An online-based questionnaire survey was administered on estate surveyors and valuers to measure their level of awareness and frequency of use of the identified valuation approaches. The feedback was collated and analyzed using descriptive statistical analysis.

Findings

The professionals are mostly aware of the traditional methods and always use the “sales comparison method” in practice. In contrast, they are not very aware of the advanced approaches and hence, only use the hedonic pricing model occasionally in practice.

Research limitations/implications

The study only focuses on the Lagos metropolis, a nationwide survey will produce more comfortable generalizable findings.

Practical implications

This is a wake-up call for the real estate regulatory bodies and indeed all the real estate professionals in Nigeria to embrace the use of the advanced valuation approaches in practice, in order to remain relevant in the international real estate practice.

Originality/value

Implementation of the recommendations of this study could help position the Nigerian real estate professionals and the industry for a global exposition.

Details

Property Management, vol. 34 no. 5
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 August 2003

Elli Pagourtzi, Vassilis Assimakopoulos, Thomas Hatzichristos and Nick French

The valuation of real estate is a central tenet for all businesses. Land and property are factors of production and, as with any other asset, the value of the land flows from the…

20736

Abstract

The valuation of real estate is a central tenet for all businesses. Land and property are factors of production and, as with any other asset, the value of the land flows from the use to which it is put, and that in turn is dependent upon the demand (and supply) for the product that is produced. Valuation, in its simplest form, is the determination of the amount for which the property will transact on a particular date. However, there is a wide range of purposes for which valuations are required. These range from valuations for purchase and sale, transfer, tax assessment, expropriation, inheritance or estate settlement, investment and financing. The objective of the paper is to provide a brief overview of the methods used in real estate valuation. Valuation methods can be grouped as traditional and advanced. The traditional methods are regression models, comparable, cost, income, profit and contractor’s method. The advanced methods are ANNs, hedonic pricing method, spatial analysis methods, fuzzy logic and ARIMA models.

Details

Journal of Property Investment & Finance, vol. 21 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 7 December 2022

Peyman Jafary, Davood Shojaei, Abbas Rajabifard and Tuan Ngo

Building information modeling (BIM) is a striking development in the architecture, engineering and construction (AEC) industry, which provides in-depth information on different…

Abstract

Purpose

Building information modeling (BIM) is a striking development in the architecture, engineering and construction (AEC) industry, which provides in-depth information on different stages of the building lifecycle. Real estate valuation, as a fully interconnected field with the AEC industry, can benefit from 3D technical achievements in BIM technologies. Some studies have attempted to use BIM for real estate valuation procedures. However, there is still a limited understanding of appropriate mechanisms to utilize BIM for valuation purposes and the consequent impact that BIM can have on decreasing the existing uncertainties in the valuation methods. Therefore, the paper aims to analyze the literature on BIM for real estate valuation practices.

Design/methodology/approach

This paper presents a systematic review to analyze existing utilizations of BIM for real estate valuation practices, discovers the challenges, limitations and gaps of the current applications and presents potential domains for future investigations. Research was conducted on the Web of Science, Scopus and Google Scholar databases to find relevant references that could contribute to the study. A total of 52 publications including journal papers, conference papers and proceedings, book chapters and PhD and master's theses were identified and thoroughly reviewed. There was no limitation on the starting date of research, but the end date was May 2022.

Findings

Four domains of application have been identified: (1) developing machine learning-based valuation models using the variables that could directly be captured through BIM and industry foundation classes (IFC) data instances of building objects and their attributes; (2) evaluating the capacity of 3D factors extractable from BIM and 3D GIS in increasing the accuracy of existing valuation models; (3) employing BIM for accurate estimation of components of cost approach-based valuation practices; and (4) extraction of useful visual features for real estate valuation from BIM representations instead of 2D images through deep learning and computer vision.

Originality/value

This paper contributes to research efforts on utilization of 3D modeling in real estate valuation practices. In this regard, this paper presents a broad overview of the current applications of BIM for valuation procedures and provides potential ways forward for future investigations.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 8 September 2022

Erastus Kiita Museleku

The purpose of this paper is to determine the most significant factors influencing apartment values in Nairobi Metropolitan Area (NMA), Kenya and develop a valuation model using…

Abstract

Purpose

The purpose of this paper is to determine the most significant factors influencing apartment values in Nairobi Metropolitan Area (NMA), Kenya and develop a valuation model using the identified variables. The paper is thus promoting the adoption of advanced, more reliable and accurate valuation methods in developing economies such as Kenya. Therefore, the paper demonstrates the potential of the hedonic pricing method (HPM) in property valuation by making objective adjustments to comparable sales data.

Design/methodology/approach

The paper utilizes a case study design by analysing recent (January 2020 to December 2021) apartment sales and apartment attributes in NMA. A sample size of 264 transactions was analysed using the HPM.

Findings

The study identified six significant factors affecting apartment values in the study area: apartment size, location, floor finishes, provision of shopping facilities, swimming pool and gym. A valuation model has been developed using the six variables.

Research limitations/implications

The paper is contributing to the ongoing global debate on the accuracy, reliability and validity of property valuations with particular emphasis on the developing economies to adopt the more accurate, efficient and reliable valuation approaches.

Practical implications

The findings are useful to property valuers and estate managers in determining the most statistically significant attributes affecting apartment values in the NMA hence enabling them to offer informed professional advice. However, the findings of the study are limited to the study area since real estate is heterogeneous.

Social implications

Property investors, financiers and other stakeholders in the society will benefit from the findings of this study in their decision-making process. Additionally, wide adoption of the more reliable and accurate valuation approaches would foster public confidence in valuation and estate management professional services leading to enhanced consumption of these services by the society and promoting public care.

Originality/value

The paper is promoting valuation accuracy, efficiency and reliability in the developing economies by advocating for advanced valuation methods. It is the first attempt to develop a valuation model for apartments in the NMA, the capital city of Kenya and the business hub of East and Central Africa.

Details

Property Management, vol. 41 no. 2
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 26 September 2008

David Lorenz and Thomas Lützkendorf

The purpose of this paper is to explain the rationale for integrating sustainability issues into property valuation theory and practice and to provide initial suggestions for…

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Abstract

Purpose

The purpose of this paper is to explain the rationale for integrating sustainability issues into property valuation theory and practice and to provide initial suggestions for valuers on how to account for sustainability issues within valuation reports.

Design/methodology/approach

The authors emphasise the key role of valuation professionals and of the valuation process itself in achieving a broader market penetration of sustainable construction. It is explained that, on the one hand, property valuation represents the major mechanism to align economic return with environmental and social performance of property assets, and thus to express and communicate the advantages and benefits of sustainable buildings. On the other hand, it is explained that gradual changes in market participants' perceptions in favour of sustainable buildings must be reflected within the property valuation and associated risk assessment process (otherwise valuers would produce misleading price estimates). The authors identify both the financial benefits and risk reduction potential of sustainable design as well as valuation input parameters that would allow these benefits to be reflected in property price estimates.

Findings

The authors show that the main reasons for immediately and rigorously integrating sustainability issues into property valuation are as follows: more sustainable patterns of behaviour are urgently necessary to sustain the viability of the Earth's ecosystems; a huge untapped market potential exists for sustainable property investment products and consulting services; sustainable buildings clearly outperform their conventional competitors in all relevant areas (i.e. environmentally, socially and financially); neglecting the benefits of sustainable design leads to distorted price estimates; and reflecting sustainability issues in property price estimates is already possible and the validity of this decision depends solely on the valuer's capability and sophistication to explain and justify his/her assumptions within the valuation report. However, it is also shown that efforts need to be undertaken to improve the description of property assets in transaction databases in order to provide the informational databases necessary to empirically underpin a valuer's decision to assign a “valuation bonus” to a sustainable building or a “valuation reduction” to an unsustainable/conventional one.

Originality/value

The paper postulates that valuation reports should be extended to include the following additional elements: a clear description of the availability of certain sustainability‐related property characteristics and attributes; a statement of the valuer's opinion about the benefits of these characteristics and attributes; and a statement of the valuer's opinion about the impact of these benefits and/or risks on property value.

Details

Journal of Property Investment & Finance, vol. 26 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 27 April 2018

Rotimi Boluwatife Abidoye and Albert P.C. Chan

The demand for accurate property value estimation by valuation report end users has led to a shift towards advanced property valuation modelling techniques in some property…

Abstract

Purpose

The demand for accurate property value estimation by valuation report end users has led to a shift towards advanced property valuation modelling techniques in some property markets and these require a sizeable number of data set to function. In a situation where there is a lack of a centralised transaction data bank, scholars and practitioners usually collect data from different sources for analysis, which could affect the accuracy of property valuation estimates. This study aims to establish the suitability of different data sources that are reliable for estimating accurate property values.

Design/methodology/approach

This study adopts the Lagos metropolis property market, Nigeria, as the study area. Transaction data of residential properties are collected from two sources, i.e. from real estate firms (selling price) and listing prices from an online real estate company. A portion of the collected data is fitted into the artificial neural network (ANN) model, which is used to predict the remaining property prices. The holdout sample data are predicted with the developed ANN models. Thereafter, the predicted prices and the actual prices are compared so as to establish which data set generates the most accurate property valuation estimates.

Findings

It is found that the listing data (listing prices) produced an encouraging mean absolute error (MAE), root mean square error (RMSE) and mean absolute percentage error (MAPE) values compared with the firms’ data (selling prices). An MAPE value of 26.93 and 29.96 per cent was generated from the listing and firms’ data, respectively. A larger proportion of the predicted listing prices had property valuation error of margin that is within the industry acceptable standard of between ±0 and 10 per cent, compared with the predicted selling prices. Also, a higher valuation accuracy was recorded in properties with lower values, compared with expensive properties.

Practical implications

The opaqueness in real estate transactions consummated in developing nations could be attributed to why selling prices (data) could not produce more accurate valuation estimates in this study than listing prices. Despite the encouraging results produced using listing prices, there is still an urgent need to maintain a robust and quality property data bank in developing nations, as obtainable in most developed nations, so as to achieve a sustainable global property valuation practice.

Originality/value

This study does not investigate the relationship between listing prices and selling prices, which has been conducted in previous studies, but examines their suitability to improve property valuation accuracy in an emerging property market. The findings of this study would be useful in property markets where property transaction data bank is not available.

Details

International Journal of Housing Markets and Analysis, vol. 11 no. 3
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 17 April 2023

Ewa Kucharska- Stasiak

The intent of this paper is to discuss the use of statistical mathematics in property valuation and the wider question concerning the role of mathematics in the field of economics.

Abstract

Purpose

The intent of this paper is to discuss the use of statistical mathematics in property valuation and the wider question concerning the role of mathematics in the field of economics.

Design/methodology/approach

This paper reviews the evolution of the application of mathematics, including statistics in economics and drawing conclusions about applicability and effectiveness of quantitative modelling in property valuation.

Findings

This paper discusses the future use of statistical models in valuation and the need to recognise the relationships between market participants and the increasingly complex environment, and their impact on value. This would suggest adopting modelling techniques from behavioural economics.

Practical implications

This paper highlights the difference between quantitative and qualitative models and discusses the role that each can play in property valuation.

Originality/value

This paper provides insights on the development of statistical modelling and discusses the application of the same in property valuation.

Details

Journal of Property Investment & Finance, vol. 41 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 8 February 2023

Kenechi Peter Ifeanacho and Idu Robert Egbenta

The purpose of this research is to ascertain the extent to which the income capitalization approach reflects the pattern of emerging rental income in Enugu property market.

Abstract

Purpose

The purpose of this research is to ascertain the extent to which the income capitalization approach reflects the pattern of emerging rental income in Enugu property market.

Design/methodology/approach

The survey research design was used in this study. Data from the field was gathered through a data collection pro forma administered to 40 valuers in Enugu metropolis in the manner of conducting interviews. This study used key valuation details of 54 sampled income generating properties valued by the respondent valuers between 2015 and 2022 using the income capitalization approach. The same sampled properties were then revalued by the researchers using annuity due assumption/formulas of the income capitalization approach. Descriptive and inferential statistics were used to analyze the data.

Findings

The study revealed that the income capitalization approach used by most valuers in Enugu does not reflect the property rental income pattern prevailing in Enugu property market where rents are paid in advance. The study further shows that the application of the income capitalization approach for valuation of annually in-advance property rental income cash flow results in a higher capital value of 3.49% in Enugu property market.

Research limitations/implications

The limitations to this study are that past valuation done by valuers were used in the analysis instead of actual property sales and a relatively small number of sampled valuers and properties are used in the study The implication of the study is that ordinary annuity assumptions or formulas is inaccurate and not suitable for valuation of income generating property in an emerging market like Nigerian where timing of cash flow is annually in advance. Based on the result of this study it seems that ordinary annuity approach negate the principle of estimating value using income capitalization method by converting future cash flow from income generating property into an estimate of property value.

Practical implications

The study advocates the adoption of the use of annuity due formulas in the valuation of income generating properties in Nigeria as its practice standard to avoid undervaluation as this assumption is logical and provides more accurate value due to prevailing lease structure and rent payments patterns in the country. The implication of the study is that the use of ordinary annuity assumptions or formulas is inaccurate and not suitable for the valuation of income generating property in an emerging market like Nigerian where timing of cash flow is annually in advance.

Originality/value

This is one of the very few empirical studies carried out in Nigeria to ascertain the extent to which the income capitalization approach used by valuers reflects the rental income pattern that prevails in the Nigeria property market.

Details

Property Management, vol. 41 no. 3
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 2 March 2012

Georgia Warren‐Myers

The purpose of this paper is to synthesise the plethora of research that has been conducted into the relationship between sustainability and market value in real estate, by…

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Abstract

Purpose

The purpose of this paper is to synthesise the plethora of research that has been conducted into the relationship between sustainability and market value in real estate, by critically analysing the research and the applicability of sustainability and value research in valuation practice.

Design/methodology/approach

The research on the relationship between sustainability and market value in real estate is examined from the perspective of its usefulness to the valuation profession in providing guidance, information and evidence to be used in valuation practice.

Findings

Existing research conducted into the relationship between sustainability and market value has not provided the valuation profession with evidence which would allow the incorporation of normative theories on the value of sustainability in valuation practice. This review highlights the lack of evidence, and the applicability of current research into sustainability and value to the valuation profession in providing guidance and information in valuing real estate incorporating sustainability.

Practical implications

This paper highlights the limited applicability of research to date in regard to the relationship between sustainability and market value for the valuation profession. The lack of historical evidence, data or information on the quantifiable effects on market value of this new trend (sustainability), leaves the valuation profession uncertain as to the relationship between sustainability and market value. There is a probable risk of valuers interpreting strategic research incorrectly, and making inappropriate adjustments or comparisons because of their lack of knowledge and limited sustainability assessment skills. Although there is an evolving body of knowledge, there is a need for extensive analysis of unbiased, evidence‐based research in individual and broader markets to provide guidance, evidence and knowledge of the implications of sustainability in the valuation of real estate.

Originality/value

The examination of research investigating the relationship between sustainability and value from a valuation perspective provides an alternative insight into the applicability of current research in valuation practice. The increasing profile and role of sustainability in the real estate sector needs to be addressed in valuation practice; however, the variety of research to date needs to be interpreted by valuers in the correct context. This paper brings to light the applicability of sustainability and value research for the broader valuation profession, and the potential implications of misuse or misunderstanding of that research.

Details

Journal of Property Investment & Finance, vol. 30 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

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