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The purpose of this paper is to provide an integrated approach that combines the two methods usually used in the real estate appraisals, namely, the income capitalisation method and the hedonic model.

In order to pull out the link between the income capitalisation approach and the hedonic model, the standard hedonic price function is introduced into the basic model of income capitalisation instead of the house market value. It follows that, from the partial derivative, a direct relation between hedonic prices and discount rate can be obtained. Finally, by using the close relationship between income capitalisation and direct capitalisation, a mathematical relation between hedonic prices and capitalisation rate is also obtained.

The developed method allows to estimate the capitalisation rate using only hedonic prices. Indeed, selling and hedonic prices incorporate all of the information required to correctly estimate the capitalisation rate. Furthermore, given the close relation among going-in and going-out capitalisation rates and discount rate, the proposed method could also be useful for determining both the going-out capitalisation rate and the discount rate.

Obviously, it is always preferable to estimate the capitalisation rate by just using comparable transactional data. Nevertheless, the method developed in this paper is especially useful when: the rental income data are missing and/or not entirely reliable; the data on rental income and house price are related to different homes; the capitalisation rate, in fact, should compare the rent and value of identical homes. In these cases, therefore, the method can be a valuable alternative to direct estimation.

The large and important literature on real estate economics and real estate appraisal neglects the relationship between hedonic prices and capitalisation rate, thus considering the hedonic model and the income capitalisation approach as two separate and alternative methods. This paper, instead, shows that integration is possible and relatively simple.

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.

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.

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.

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.

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.

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.

Presents an evaluation of the theoretical context and practical application of different methods of hotel valuation, with particular emphasis on the methods related to the income‐generating capacity of a hotel. The findings reveal a wide range of variation and complexity between methods and that each method has benefits and limitations and requires adjustments and assumptions in different market conditions. However, it is concluded that the more sophisticated “income‐based” income capitalisation methods constitute the most effective basis for a framework on which to derive the open market value for a hotel as an ongoing business entity, but that one or more of the other main valuation approaches should be drawn on in order to effect the reconciliation of a hotel’s final value.

The purpose of this paper is twofold: primary, to argue that the profits method, specifically a discounted cash flow (DCF)-based profits method, should be the preferred method of valuation when valuing specialised property. Secondary, to make technical recommendations in the application of the method.

Literature was reviewed on the theory of the profits method as well as physical valuations performed in practice. Improvements for the profits method are suggested from the review of six valuations conducted in South Africa in the specialised property sectors. A qualitative approach is followed in the research as broad principles are extracted from the valuation reports as implications and improvements for the profits method.

The profits method is more flexible and sophisticated than the cost approach in taking into account systematic and unsystematic risk. The profits method is more accurate than the cost approach in delivering a true reflection of the value of specialised property for any purpose but specifically for mortgage lending purposes and reduces the credit exposure risk of financial institutions. It also decreases pricing inefficiencies to be exploited by buyers and sellers.

Three improvements to the profits method are suggested. First, revenue could be forecasted based on a probability-weighted approach. Second, a modified capitalisation rate is suggested to the capitalisation rate formula in the calculation of G. Third, a market rental aggregation anchoring and judgement-based approach is suggested as rationale for determining the hypothetical rental split.

There seems to be a general lack in literature on the profits method of valuation and its application to specialised properties, specifically a DCF-based approach, with this paper being a technical contribution to the body of knowledge on this topic.

The purpose of the article is to discuss how the demand for disclosure regarding property valuation in financial reports can be fulfilled.

The starting point is the generally established methods for property valuation and the different types of data that they need. From this it is deduced what kind of information that it is necessary to supply.

An important conclusion from the research reported in this paper is that disclosure regarding applied methods, significant assumptions in property valuations and statements about the connections between appraised values and market evidence needs refinement in financial reports, according to International Financial Reporting Standards (IFRS). As the uncertainty in property valuations cannot be removed, it has to be managed. Providing explicit disclosure about valuations is one important way to manage this issue by reducing the gap of information asymmetry between those who perform valuations and those who are users of financial statements.

Providing high quality disclosure on these issues would make analysis and the application of individual judgement by users of financial reports far easier. Findings reported in this paper imply that many companies have not so far found the right balance between cost and benefits regarding what amount of disclosure would be appropriate on this issue in financial reports.

The detailed discussion about what information that should be disclosed concerning property valuation is an original contribution of the paper.

The purpose of this paper is to present a methodology based on the transactional asset pricing approach (TAPA) and to illustrate the application of TAPA within the context of professional property valuation.

The TAPA is a novel analytical valuation methodology recasting the traditional derivations of the income approach techniques, including DCF, from a transactional perspective based on the principle of inter-temporal transactional equity, instead of the conventional investor-specific view originating from I. Fisher (1907, 1930).

The authors present DCF analysis as a specific case of a more general TAPA approach to valuation under the income method. This also leads to novel analytical derivations of the Direct income capitalization, Gordon, Inwood, Hoskold and Ring models. Based on the TAPA framework, the authors also research the value-enhancing effects of benchmark market volatility on the subject property value and conclude that such effects can be statistically significant depending on the DCF analysis period.

The research has a direct bearing on time-variable discount rate forecasting capabilities, as it uses a time-variant structure for the discount rates.

Using the US Case-Shiller and BLS rental indices as a valuation benchmark, the paper contains an example of applying the general TAPA framework to value a notional property under a TAPA’s DCF version. Such property valuations can be easily replicated in practice – especially in the context of equitable/fair value determination under the International Valuation Standards Council valuation standards.

TAPA is a deductive principles-based theory of asset valuation especially fit for the transactional and illiquid asset valuation contexts – thus enabling a more efficient pricing for such assets in a sense of reflecting the transactional interests of the parties more closely than achievable under the conventional valuation methods.

TAPA is an original filiation of research with roots going as far back as Aristotelian Catallactics. It contains analytical formalizations of certain transactional equity principles.

Outlines the context within which the need for valuations of leisure property is developing. Arguing that the profits method, usually adopted for the valuation of leisure assets, is little understood on a research‐based theoretical level, introduces the initial findings of research into practitioner understanding of the method, in particular the capitalization rates adopted. Also suggests that the time is right to critically re‐examine the methods used in practice and sets out suggested pre‐requisites for the development of a sustainable and defensible approach to the valuation of commercial leisure property.

The purpose of this paper is to establish whether a terminal value is a substantial amount of the final figure in a hotel’s valuation. Malta’s scenario has been delved into. This due to the fact that owing to Malta’s high population density and its restrictive land area, land values attract a high premium as compared with larger developed countries. Other matters such as earnings’ multipliers derived from a cap rate (initial yield), CAPEX has also been delved into.

The methodologies adopted in hotel valuation practice has been delved into. An extensive literature review is undertaken to analyse the earnings multiplier adopted by various authors over the past 30-year period. The hotel cap rate (initial yield) has been compared with similar yields adopted in the institutional and property markets and then compares to market-based data. A discussion is undertaken on the validity of adopting discounted cash flow, as against the short cut market appraisal approach. Capitalization rates, cap rates have also been referred to as obtained from the academic and practitioners field and compared. Depreciation and the anticipated annual accommodation charges have been analysed. A database of hotel rooms value over the past 20-year period has been referred.

A table outlines the earnings’ multipliers in perpetuity or for the limited expected design life for various cap rates. This data will act as a guide in guiding practitioners to establish an earnings’ multiplier to be applied in their valuation methodology. An example in the Appendix clarifies the manner in which this data table is to be utilized. The finding of this example notes that for this hotel in Malta, as constructed on private land, the terminal value for this development hovers around the 30 per cent of the market value.

This analysis is based on five valuations as undertaken on five hotels in Malta with classification grades varying from III to V. This notes that the terminal value varies within a range of 9-45 per cent of the total value. This analysis has to be undertaken for other countries for a global range of land terminal values percentages to be established.

Establishing the terminal value of a hotel business, will offer greater security for secured lending facilities required. It will further act as an important tool to establish the feasibility of a hotel development.

Updated insight is given to existing hotel valuation methodologies by delving into the workings of the earnings’ multiplier and establishes that in today’s market the terminal value of the hotel basis has to be accounted for. The above findings are based on a link between theory and practice.

The purpose of this study is to describe and analyse the methods and standards of valuation used by Swedish professional property valuers when appraising commercial properties and factors affecting those standards. The study builds on a 2002 comparative study of valuers in four European countries by McParland et al. (2002), but focuses specifically on property valuers in Sweden.

In 2010-2011, a questionnaire was used in face-to-face interviews with about half of the authorised property valuers in Sweden. Another questionnaire was emailed to all authorised property valuers in Sweden 2015 and again about half participated.

Analysis of the results shows some new trends in used and preferred standards and methods. Although Swedish valuers still rely mainly on local guidelines, they now increasingly use international standards and company guidelines, which may indicate a growing, if indirect, form of internationalisation. Swedish valuers still use discounted cash flow as their primary method, but their use of comparative methods has increased.

The data in this comparative study of valuation standards and methods over time used were collected from a specific group of property valuers authorised through the professional Swedish organisation Samhällsbyggarna (Swedish Professionals for the Built Environment), which contributes to an insight in the presiding of the harmonisation of valuation methods and standards.

Whilst the real estate development appraisal practices of large national and international real estate companies are well understood, relatively little is known about how development appraisals are conducted by indigenous appraisers and valuers in developing countries. The purpose of this paper is to investigate how development appraisal is conducted in Brazil, compared to the UK, focusing primarily on the methods employed by small- and medium-sized real estate practices and their appraisers to appraise the viability of commercial real estate developments in the State of Sao Paulo.

The study employs a two phase Delphi Method to capture and analyse empirical data from small- and medium-sized real estate appraisers in Brazil. Using the long established and relatively transparent UK Residual Method of development appraisal as a template against which to compare Brazilian appraisal methods, guidance and practice. To understand how indigenous development appraisers operate the Brazilian development appraisal methods, the research was conducted in Portuguese by a bi-lingual real estate expert who was familiar with both UK and Brazilian practice.

The research establishes that appraisers working for small- and medium -sized real estate practices in Brazil rarely use the Residual Method. Instead, they employ a range of methods, the choice of which is heavily influenced by the availability of comparable market data, with Direct Comparison of market data and the Capitalisation of Income being the methods of choice. Appraisers rarely employ the Residual Method as the principal development appraisal technique, using instead the Comparative Method and Discounted Cash Flow (DCF) analysis. Land prices are usually agreed or already known and developer’s profit is usually determined using DCF analysis and is highly sensitive to fluctuations in construction costs.

The research engaged with a small number of appraisers and valuers in small- and medium-sized practices in the State of Sao Paulo using a two-phase Delphi Method. The long established UK Residual Method of development appraisal was used as a template against which to compare practice in Sao Paulo State. There is potential therefore to replicate the research in other Brazilian States and transfer the methodology to other developing countries.

In Brazil, when development land in urban areas is acquired on the basis of plot exchange, land is often sold at less than market value and the original landowner retains an equity stake in the development and shares in the development overage. The practice of “permuta física”, giving landowners the freehold of part of the development, or “permuta financeira”, whereby the landowner receives an enhanced land price, indexed against development value, is of potential relevance to the UK and other developed countries that need help in urban unlocking land markets.

The research is a unique comparative study of development appraisal methods employed by small- and medium-sized practices in Brazil. It contributes to the limited literature that has so far been published in English on Brazilian development appraisal methods and reveals the similarities and differences with the Residual Method of development appraisal that is widely used in the UK and other developed countries.