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Article
Publication date: 6 July 2015

Jaclyn Kropp and Janet G. Peckham

In recent years, prices for prime farmland have increased substantially, begging the question is the dramatic increase the result of a speculative bubble or consistent…

Abstract

Purpose

In recent years, prices for prime farmland have increased substantially, begging the question is the dramatic increase the result of a speculative bubble or consistent with market fundamentals with increases driven by increased global demand, low interest rates, and recent changes to US agricultural and energy policies. The purpose of this paper is to investigate the impacts of recent agricultural support policies and ethanol policies on farmland values and rental rates.

Design/methodology/approach

Farm-level Agricultural Resource Management Survey data collected by the United States Department of Agriculture (USDA) between 1998 and 2008 as well as county-level data collected by the USDA, US Census Bureau, and Bureau of Economic Analysis are used to determine the impacts of recent agricultural support policies and ethanol policies on farmland values and rental rates, while controlling for parcel characteristics and urban pressure. Specifically, weighted ordinary least squares and two-stage least squares are used to investigate the impact of various governmental agricultural support policies, corn ethanol facilities location, and local corn ethanol production capacity on farmland values and rental rates.

Findings

The results indicate that government payments, urban pressure, and the proximity of the parcel to an ethanol facility have a positive impact on both farmland values and rental rates. More specifically, parcels located in the same county as at least one corn ethanol facility are more valuable and command higher rental rates. In addition, county-level ethanol production capacity is positively associated with farmland values and rental rates. An inverse relationship between distance of the parcels from an ethanol facility and farmland values is also found; a similar result is found for rental rates.

Research limitations/implications

The findings suggest that agricultural support payments and ethanol policies are capitalized into farmland values. These findings have important implications for the formulation of future farm policy. A limitation of the analyses is that farmland values are estimated by landowners; future research could utilize farmland transaction data to overcome potential biases generated by using landowner estimates. In addition, while our study period covers 11 years, future research could expand the time period further to analyze the effect of more recent agricultural and ethanol policies.

Originality/value

This paper extends prior research pertaining to factors influencing farmland values and rental rates by also examining the proximity of the parcel to an operating ethanol facility using a unique data set.

Details

Agricultural Finance Review, vol. 75 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 1 March 1995

Mark Teale

Rising occupational costs, unit shop oversupply and falling retailsector profits have generated demands for changes to the currentvaluation and leasing procedures. Tests…

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960

Abstract

Rising occupational costs, unit shop oversupply and falling retail sector profits have generated demands for changes to the current valuation and leasing procedures. Tests the accuracy of rental value estimation at review by identifying the actual residual value of occupation to existing tenants, and quantifies demand volume requirements at different levels of rental increase so that the interpretation of transactional evidence can be set in an actual demand volume context by selecting two shopping centres – Brent Cross and MetroCentre – for audit. Concludes that the long‐running dispute between landlords and tenants over rent review valuations is a market information problem that can be resolved only by the release of local sales data.

Details

Journal of Property Valuation and Investment, vol. 13 no. 1
Type: Research Article
ISSN: 0960-2712

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Article
Publication date: 1 January 1985

STEPHEN SYKES

The market value of any property investment will tend to deteriorate over time when compared to similar modern properties if monies are not periodically expended to…

Abstract

The market value of any property investment will tend to deteriorate over time when compared to similar modern properties if monies are not periodically expended to mitigate the effects of obsolescence. This paper examines the relationship between the initial yield of a property at purchase and the rate of future rental value growth necessary to achieve a criterion rate of return on the investment. Traditionally in calculations of the future rental growth rate required to justify an initial investment yield (when compared, say, to the rental shown by gilt‐edged stocks) the simplistic view is taken that following purchase no further expenditure is anticipated. However, if a property is to maintain its original market appeal (or adapt to evolving circumstances), capital must from time‐to‐time be injected for the purposes of refurbishment. Thus, any analytical model which ignores this inevitable expenditure, but nevertheless assumes a constant rate of long‐term future rental growth, is quite unrealistic. A Refurbishment‐Rental Growth Model is derived which allows the introduction of regular future capital expenditure both in terms of magnitude and frequency. Various examples are illustrated of the effect which such expenditure may have in necessarily increasing the required future rental growth for a property investment in order to achieve an anticipated level of return.

Details

Journal of Valuation, vol. 3 no. 1
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 10 May 2011

Neil Crosby, Steven Devaney and Vicki Law

The paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation‐based…

Abstract

Purpose

The paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation‐based data. These problems relate to inconsistent valuation regimes and the difficulties in finding appropriate benchmarks.

Design/methodology/approach

The paper adopts a case study of seven major office locations around Europe and attempts to determine ten‐year rental value depreciation rates based on a longitudinal approach using IPD, CBRE and BNP Paribas datasets.

Findings

The depreciation rates range from a 5 per cent PA depreciation rate in Frankfurt to a 2 per cent appreciation rate in Stockholm. The results are discussed in the context of the difficulties in applying this method with inconsistent data.

Research limitations/implications

The paper has methodological implications for measuring property investment depreciation and provides an example of the problems in adopting theoretically sound approaches with inconsistent information.

Practical implications

Valuations play an important role in performance measurement and cross border investment decision making and, therefore, knowledge of inconsistency of valuation practice aids decision making and informs any application of valuation‐based data in the attainment of depreciation rates.

Originality/value

The paper provides new insights into the use of property market valuation data in a cross‐border context, insights that previously had been anecdotal and unproven in nature.

Details

Journal of European Real Estate Research, vol. 4 no. 1
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 17 July 2019

Harish Kumar Singla and Priyanka Bendigiri

The purpose of this paper is to find out the factors affecting rentals of residential apartments in Pune, India.

Abstract

Purpose

The purpose of this paper is to find out the factors affecting rentals of residential apartments in Pune, India.

Design/methodology/approach

Four regression models are developed, i.e. basic ordinary least square (OLS) regression model, OLS regression model with robust estimates, OLS regression model with clustered robust estimates and generalized least square (GLS) regression model with maximum likelihood (ML) robust estimates. Based on the Akaike information criterion and Bayesian information criterion criteria, OLS regression model with clustered robust estimates and GLS regression model with robust estimates are best fit. The data are tested for multicollinearity and the models are tested for heteroscedasticity. The study uses the expected rent value data collected from Web portals and the data on factors affecting the rental value of residential property are collected through the study of land use maps, Google earth software and field visits.

Findings

Total floor area and number of rooms are structure related factors that positively affect the rental value, i.e. more the area and number of rooms, higher the rental value. The distances from the nearest police station and fire station are security and safety factors. The results suggest that higher distance from these factors leads to lower rental values, as safety and security is the top priority of residents seeking residential property on rental basis. The distance from employment zones, distance from nearest school/college and the distance from the nearest public transport terminal are convenience related factors that negatively affect the rental value, as greater the distance, lesser the rental value and vice versa. The distance from Central Business District and hospitals has a positive effect on the rental values of a residential property implying that higher distances from these places command higher rental value.

Research limitations/implications

The study relies on rental data that owner is expecting for a particular property, it is not certain that the property would be actually rented for the same value. Second, researchers had to drop certain important drivers of rental value because of the issue of multicollinearity.

Practical implications

This is one of the rare studies conducted in Indian context, and the findings of the study are useful from the owner, tenants, urban bodies and developers’ point of view. Knowing that India is one of the fastest growing markets and need for housing is increasing day by day (including housing facility on rental basis), the stakeholders need to take care of the factors that affect the rental values of a residential property.

Social implications

The authors suggest the governments and the municipal bodies in India to come up with a public rental housing policy that separately caters to the needs of the lower income group, middle and upper income group in at least metros, tier I and tier II cities that are witnessing unprecedented growth in job seeking immigrants, who are seeking properties on rental basis. While developing a public rental policy, they must keep in mind the factors that are driving the rental values, such as proximity to employment zones, proximity to proper school and college, efficient public transport system as well as all safety and security measures. Creation of such a public rental policy is a win–win situation for immigrants, property owners and government/urban development bodies.

Originality/value

This paper is the first empirical study about the factors affecting rental values in Pune, India. The study will help property owners, immigrant and local tenants, government and urban development bodies to develop an understanding about the important factors affecting rental value and come up with their respective plans. Advanced econometric regression models are used based on the data that is collected through actual field visits, study of maps and secondary information rather than use of survey method or creation of dummy variables.

Details

International Journal of Housing Markets and Analysis, vol. 12 no. 6
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 1 August 2000

Neil Crosby and Sandi Murdoch

This paper examines the effect which the rent assessment process has on the level of rents and rental values in the commercial property market in England and Wales, by…

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2315

Abstract

This paper examines the effect which the rent assessment process has on the level of rents and rental values in the commercial property market in England and Wales, by asking: is there an accepted definition of open market rental value which is consistently adhered to, irrespective of the context in which the rent is assessed? How, in theory, do the procedures by which an assessment of open market rental value is arrived at differ as between a new letting, a lease renewal, and a rent review? Is there any evidence to suggest that any theoretical differences in the operation of the various rent assessment procedures are borne out in practice? In particular, is there any evidence that in new lettings and lease renewals lease terms are changed after the rent has been finalised? Is there any evidence to demonstrate that there are different levels of rent which are sufficiently consistent to be referable to the context in which the rent was assessed? If so, does this produce difficulties in the valuation process which may not be presently fully appreciated? In addition to a review of the relevant literature, the primary research undertaken for the study was a survey of surveyors and solicitors involved in commercial lettings and rent reviews and the compilation of a database of rental valuations and transactions.

Details

Journal of Property Investment & Finance, vol. 18 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 April 2004

Tien Foo Sing and Wei Liang Tang

This paper models the lessee's default options and estimates the economic value of the options for a lessee using a discrete time binomial American option pricing model…

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1771

Abstract

This paper models the lessee's default options and estimates the economic value of the options for a lessee using a discrete time binomial American option pricing model. Results show a positive relationship of the option premium with the original rent and a negative relationship with the relocation costs. Finds that the default probability is higher for lessees who are more sensitive to rental changes and place less emphasis on the fitting‐out quality. Suggests that rental volatility and rental growth rate are two significant factors that have positive relationships with the default option values. The risk‐free rate, on the other hand, has an inverse relationship with the default option values because a higher risk‐free interest rate reduces the present value of rental savings. Lease term length to expiration has a positive effect on the default option value, implying that the default option premium will decay as the term to expiry is shortened.

Details

Journal of Property Investment & Finance, vol. 22 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 10 June 2014

Oluseyi Joshua Adegoke

This paper adds to the emerging knowledge base in the Nigeria and is of relevance to all residential property stakeholders. A number of empirical studies have demonstrated…

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1653

Abstract

Purpose

This paper adds to the emerging knowledge base in the Nigeria and is of relevance to all residential property stakeholders. A number of empirical studies have demonstrated that several factors influence residential property values. However, there is a paucity of empirical research on critical factors influencing rental value of residential property in Nigeria. The purpose of this paper is to serve to address this gap by examining critical factors influencing rental value of residential property in the three densities area of Ibadan metropolis, Nigeria.

Design/methodology/approach

The study used random sampling to select 624 residential properties out of 3,120 residential properties in the portfolio of 52 Estate Surveying and Valuation firms located within Ibadan metropolis, Nigeria. Data collected were analysed using a hedonic pricing specification.

Findings

The results show that different critical factors influences rental values of different types of building in different residential densities. Number of bathroom (NOB), number of living room (NOL) and existence of burglar alarm (EOBA) were critical to bungalow in the whole area of Ibadan while number of toilet (NOT) was critical to duplex. In low-density area; residential location and EOBA have a significant positive impact on rental value of bungalow while NOT, NOBs (NOR), NOL and EOBA have a significant positive impact on detached house. However, it was NOR and EOBA that were critical in the medium density to bungalow.

Practical implications

The study concluded that each of the residential densities is homogenous and, therefore, every residential property stakeholders should recognise the importance of each factor on rental values so that their valuation estimates will be useful and reliable.

Originality/value

The study is one of the few attempts at examining factors affecting residential property value. This paper examined critical factors influencing rental value of residential property in the three densities area of Ibadan metropolis, Nigeria.

Details

Property Management, vol. 32 no. 3
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 5 July 2013

Charles‐Olivier Amédée‐Manesme, Fabrice Barthélémy, Michel Baroni and Etienne Dupuy

This paper aims to show that the accuracy of real estate portfolio valuations and of real estate risk management can be improved through the simultaneous use of Monte…

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1157

Abstract

Purpose

This paper aims to show that the accuracy of real estate portfolio valuations and of real estate risk management can be improved through the simultaneous use of Monte Carlo simulations and options theory.

Design/methodology/approach

The authors' method considers the options embedded in Continental European lease contracts drawn up with tenants who may move before the end of the contract. The authors combine Monte Carlo simulations for both market prices and rental values with an optional model that takes into account a rational tenant's behaviour. They analyze how the options significantly affect the owner's income.

Findings

The authors' main findings are that simulated cash flows which take account of such options are more reliable that those usually computed by the traditional method of discounted cash flow.

Research limitations/implications

Some limitations are inherent to the authors' model: these include the assumption of the rationality of tenant's decisions and the difficulty of calibrating the model given the lack of data in many markets.

Originality/value

The main contribution of the paper is both by accounting for market risk (Monte Carlo simulations for the prices and market rental values) and for accounting for the idiosyncratic risk (the leasing risk).

Details

Journal of Property Investment & Finance, vol. 31 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 25 October 2019

Benjamin Gbolahan Ekemode

The purpose of this paper is to assess the effect of urban regeneration and renewal activities initiated by the Osun State Government in Nigeria on the rental values of…

Abstract

Purpose

The purpose of this paper is to assess the effect of urban regeneration and renewal activities initiated by the Osun State Government in Nigeria on the rental values of commercial properties in Osogbo, the state capital between 2008, before the urban renewal programme through 2017, after the urban renewal programme had been completed.

Design/methodology/approach

Primary data utilised for this study were collected from all the Estate Surveying and Valuation firms involved in the formal management of commercial properties in Osogbo, Osun-State, Nigeria. Information on the types of urban infrastructure renewed and rental values of 63 commercial properties from 2008 to 2017 were obtained from the sampled estate surveying and valuation firms practicing in the study area. Data were analysed using descriptive statistics, analysis of variance and Duncan post hoc test.

Findings

The findings showed that physical urban infrastructure such as roads, drainages, water supply and wastes disposal have been upgraded in the study area. Also, the study established that the urban regeneration programme had significant impact on the rental values of commercial properties in Osogbo, arising from the statistically significant difference (F(7, 600) = 22.264, p<0.000) between and within annual rental values of commercial properties in the study area. The annual rental values of the commercial properties also exhibited considerable variation based on the Duncan post hoc test.

Practical implications

The findings from this study indicate that urban regeneration programme by the Osun state Government has significantly increased the investment performance of commercial properties in the study area. Hence, while investors could achieve higher returns on investment by venturing into commercial property investment, revenue could also be generated for government through the collection of property taxes in the study area.

Originality/value

This study is one of the few studies that have analysed the effect of urban regeneration programme on commercial property values from the perspective of an emerging African economy, using data from Osun State, Nigeria.

Details

Smart and Sustainable Built Environment, vol. 9 no. 4
Type: Research Article
ISSN: 2046-6099

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