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Article
Publication date: 14 August 2007

Nick French and Laura Gabrielli

In January 2005, the International Valuation Standards Committee (IVSC) published the International Valuation Guidance Note No. 8 entitled The Cost Approach for Financial

Abstract

Purpose

In January 2005, the International Valuation Standards Committee (IVSC) published the International Valuation Guidance Note No. 8 entitled The Cost Approach for Financial Reporting – (DRC). This guidance note provides background to the use of depreciated replacement cost (DRC) in connection with International Valuation Application 1 (IVA 1), Valuation for Financial Reporting and suggests that the valuer reports the result of a DRC valuation as market value subject to the test of adequate profitability or service potential. This suggestion has caused a lot of debate and consternation in the UK where the DRC approach has always been considered as a method of last resort and not a market valuation. However, in continental Europe the cost approach (DRC) is often the principal method of valuation and has always been considered to produce market value. The purpose of this paper is to discuss the impact of this change to valuation practice in the UK.

Methodology/design/approach

In this paper, we discuss the concept of market value and its relationship to DRC in an attempt to identify the principal areas of concern in the UK and, through the use of an Italian case study, show how the DRC approach can be adopted as an appropriate method (not basis) for calculating Market Value.

Findings

It is probable that most valuers will still provide the DRC valuation using exactly the same calculation as they did before. They are likely to provide the same (relative to the valuation date) figure; the difference is that they will feel less easy about the robustness of that figure

Originality/value

It is argued that the UK market has, for too long, hidden behind DRC being a basis of value that UK valuers now feel uncomfortable in reporting DRC as market value. They are uncertain with the valuation figure. However, this uncertainty can be addressed in other ways and a suggested “solution” to help the valuer overcome their discomfort with the market valuation is proffered.

Details

Journal of Property Investment & Finance, vol. 25 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 22 December 2020

Laura Gabrielli and Nick French

Valuation is the process of determining Market Value. Property valuation, as with the valuation of all assets, is an estimation of price in the market. It is value in…

Abstract

Purpose

Valuation is the process of determining Market Value. Property valuation, as with the valuation of all assets, is an estimation of price in the market. It is value in exchange. The valuer role is to determine the appropriate approach, the method and use the right model to achieve this aim as best as possible. It is a combination of analysing the market and determining the critical variables for the valuation method/model. The method is separate from the valuation process which should be followed (according to the International Valuation Standards Council Valuation Standards) regardless the valuation method chosen. There are valuation approaches, valuation methods and, as a subset of the methods, techniques or models.

Design/methodology/approach

This practice briefing is an overview of the Valuation Methods and Models available to the valuer and comments on the appropriateness of valuation each in assessing Market Value for specific property types.

Findings

This briefing is a review of the valuation methods and models and models that can be applied to determine market value.

Practical implications

The role of the valuer in practice is to identify the method of valuation and then apply the correct mathematical model for the valuation task in hand.

Originality/value

This provides guidance on how valuations can be presented to the client in accordance with the International Valuation Standards.

Details

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

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Article
Publication date: 2 July 2018

Nick French and Laura Gabrielli

Since the global financial economic crisis hit the world markets in 2007/2008, the role of property valuation has been under greater and greater scrutiny. The process of…

Abstract

Purpose

Since the global financial economic crisis hit the world markets in 2007/2008, the role of property valuation has been under greater and greater scrutiny. The process of valuation and its quality assurance has been addressed by the higher prominence of the International Valuation Standards Council (IVSC). This is a significant initiative worldwide. However, there has been little written on the appropriate use of valuation approaches and methods in market valuations. There is now a hierarchy of valuation definitions. In order, there are valuation approaches, valuation methods and, as a subset of the methods, techniques or models. The purpose of this paper is to look at the importance of identifying the appropriate approach to be adopted in market valuations and the methods, techniques and models that should be applied to determine market value.

Design/methodology/approach

This practice briefing is an overview of the valuation approaches, methods and models available to the valuer and comments on the appropriateness of valuation each in assessing market value.

Findings

This paper reviews the IVSC-recognised approaches and prompts the valuer to be careful with the semantics involved so that they are better placed to provide an unambiguous service to their clients.

Practical implications

The role of the valuer in practice is to identify the appropriate approach for the valuation of the subject property, choose the right method and then apply the correct mathematical model for the valuation task in hand.

Originality/value

This provides guidance on how valuations can be presented to the client in accordance with the International Valuation Standards.

Details

Journal of Property Investment & Finance, vol. 36 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 7 May 2019

Lina Bellman and Hans Lind

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Journal of European Real Estate Research, vol. 12 no. 1
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 2 March 2012

Tobias Schnaidt and Steffen Sebastian

There is a continuing discussion about whether German valuation methods are inaccurate and inferior to the British standard, and the enduring efforts for a European and…

Abstract

Purpose

There is a continuing discussion about whether German valuation methods are inaccurate and inferior to the British standard, and the enduring efforts for a European and internationally standardised valuation method and value definitions intensify this discussion. The German valuation system is said to lead to valuations which do not reflect actual market conditions and excessive smoothing. Not surprisingly, German surveyors usually disagree and claim that the German valuation approach, with its sustainable rental value, fulfils not only its purpose but is more transparent and thus superior to the approach usually applied in UK. The purpose of this paper is to discuss the recently adjusted German valuation methods.

Design/methodology/approach

The paper analyses the German valuation methods and highlights the predominant differences to the British valuation standards.

Findings

The paper shows that the discussed valuation methods should lead to comparable results. The legal framework of the German valuation approaches can therefore not be blamed for any of the observed empirical phenomenon.

Originality/value

The paper discusses the recently adjusted German valuation methods.

Details

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

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Article
Publication date: 1 October 2009

W.S. Nel

The question that inevitably surfaces in practice, and certainly in lecture halls, is which equity valuation method is superior. Popular opinion holds that academia and…

Abstract

The question that inevitably surfaces in practice, and certainly in lecture halls, is which equity valuation method is superior. Popular opinion holds that academia and investment practitioners may have different preferences in this regard. This article investigates which primary minority and majority equity valuation methods are advocated by academia, and how well these preferences are aligned with the equity valuation methods that investment practitioners apply in practice. The research results reveal that, contrary to popular belief, academia and practice are fairly well aligned in terms of preferred equity valuation methods, with notable differences in their respective approaches.

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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…

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

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Article
Publication date: 1 December 2004

Nick French

Provides a brief overview of the methods that used in real estate valuation with a particular emphasis on the valuation of specialised property. Proposes that the…

Abstract

Provides a brief overview of the methods that used in real estate valuation with a particular emphasis on the valuation of specialised property. Proposes that the underlying requirement is to estimate market value and that the role of the valuer is to choose the method that is the best model to achieve this objective. Concludes that a valuer must work with the recognised techniques and, in the case of specialised property, these are methods that go back to analysing value from first principles by identifying the value of the property to the business.

Details

Journal of Property Investment & Finance, vol. 22 no. 6
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 21 October 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…

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.

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Article
Publication date: 1 March 1995

Sarah L. Sayce

Outlines the context within which the need for valuations ofleisure property is developing. Arguing that the profits method, usuallyadopted for the valuation of leisure…

Abstract

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.

Details

Journal of Property Finance, vol. 6 no. 1
Type: Research Article
ISSN: 0958-868X

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