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Assumes that the education of valuers is generally directed towards producing professionally qualified personnel who are able to value a wide variety of properties by using standard accepted methodology. Suggests that teaching the concepts of valuation in isolation without any economic reference point is insufficient to establish whether the acquisition of any property will improve the performance of a portfolio. Concludes that the basis of education in valuation needs to change in order to address those issues that have economic relevance in a market dominated by international institutional investors.

Hong Kong is one of the most dynamic property markets in the world, and now provides the economic gateway to China. Using style analysis, the level of direct property in Hong Kong property company performance is shown to be approximately 15 per cent over 1984‐2000, with the level of direct property increasing to approximately 25 per cent in recent years. The level of direct property in Hong Kong property company performance is significantly below that seen for the USA, Europe and Australia. This highlights a number of key strategic property investment issues over 1984‐2000, relating to the level of direct property in Hong Kong property company performance. Also assesses the level of direct property at the individual property company level, as well as the property company sector level, further emphasising the strategic role of Hong Kong property companies in an investment portfolio. This research complements the previous research by Brown and Chau on excess returns in the Hong Kong property market, as well as highlighting the issues and role of both direct and indirect property for inclusion in diversified investment portfolios; these being key areas of Gerald Brown's extensive property research agenda.

Although real estate represents a substantial proportion of the UK investment market, research in this area is extremely limited. This is particularly true of the performance and construction of portfolios. This paper deals with one of the major issues which confronts both investor and advisor; namely, how effective is the diversification of a real estate portfolio as more properties are included. The analysis is undertaken at an empirical level and draws on similar research developed in the stock market. The main findings are that the low correlation between returns on individual properties enable high levels of risk reduction to be achieved. This correlation structure does, however, impose a penalty making it extremely difficult to construct highly diversified portfolios. The problem is exacerbated by the indivisibility of real estate assets.

In order to develop our understanding of valuation models and so extend this to encompass the important area of performance measurement and its interpretation, it is essential to have a framework which will enable such developments to take place. This paper presents a theoretical model based on a certainty equivalent approach which enables the market risk of individual properties and portfolios to be assessed on an expectations basis. The data requirements for using the model are not onerous and with simple extensions it can be adapted to cope with changes in risk that occur when variations in the lease structure are anticipated. Understanding the influence of systematic or market risk is essential if our understanding of valuation is to improve. Systematic risk is the single most important factor which determines the premium which should be allowed to compensate for risk. This aspect has been largely ignored in the property literature with the result that risk premium figures are frequently assumed to be constant across all sectors and properties. This paper derives a model which attempts to overcome some of these problems. Due to data limitations empirical tests of the model cannot be regarded as conclusive. However, those tests that have been carried out suggest that the model could be used for estimating the required rate of return of both sectors and individual properties. It also has considerable potential in estimating growth expectations for groups of properties and can thus be used in the decision‐making process. Much, however, remains to be done.