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Hans Lind. Advanced Issues in Property Valuation
Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Advanced Issues in Property Valuation
Preface
1 Introduction. 1.1 The General Purpose of the Book
1.2 Overview of Issues Covered
1.3 How the Book Can be Used
Note
2 The Concept of Market Value. 2.1 Introduction
2.2 Standard Definition
2.3 Criteria for a Good Definition: Clear, Measurable, Concise and Relevant
2.4 Problem 1: ‘Estimated Price’ or ‘Most Probable Price’?
2.5 Problem 2: Shall the Definition Refer to a Competitive Market?
2.6 Problem 3: Should the Definition Refer to Prudent and Knowledgeable Actors?
2.7 Problem 4: Should the Definition Include a Reference to Willing Seller and Willing Buyer?
2.8 Problem 5: Market Value and Turnover
2.9 Highest and Best Use
2.10 Conclusion
Exercises
Note
3 Finding the Market Value: What Is a Valuation Method and How Should the Methods Be Categorized? 3.1 Introduction and Overview
3.2 The Three Classic Valuation Approaches/Methods. 3.2.1 The Sales Comparison Approach
3.2.2 The Income Approach
3.2.3 The Cost Approach
3.2.4 Are There Other Approaches?
3.3 A Problem with the Standard Classifications
3.4 The Information Base of a Valuation
3.5 A Different Way to Classify Valuation Methods
3.5.1 The Sales Comparison Approach
3.5.2 Using Direct Information from the Actors
3.5.3 Using Data from the Stock Market
3.6 Adjustment Methods
3.6.1 General Statistical Analysis
3.6.2 Using Discounted Cash‐Flow Analysis for Valuing the Difference
3.6.3 Costs and Rules of Thumb
3.6.4 Actor‐Based Approach
3.7 Why Is Regression Analysis (Hedonic Methods) Seldom Used in Ordinary Valuations?
3.8 What Is Really the Cash‐Flow Method? 3.8.1 How Can the Cash‐Flow Method Give a Market Value?
3.8.2 Problems When Using Accounting Data in Valuations
3.9 Valuation of Development Properties and Option Aspects. 3.9.1 Development Properties – Some General Issues
3.9.2 Real Options Aspects
3.10 Use of Different Methods in the Valuation of a Specific Object: Concluding Comments
Exercises
Notes
4 Uncertainty and Bias in Property Valuations
4.1 Introduction
4.2 Valuation Variance: Why Do Valuers Disagree?
4.3 Valuation Accuracy: Why Do the Observed Price Differ from the Market Value?
4.4 How Confident Is the Valuer in the Estimated Market Value?
4.5 How Stable Is the Estimated Market Value?
4.6 Client Influence and Bias
4.7 Behavioural Factors
4.8 Valuation Smoothing
4.9 How Self‐Selection Can Lead to ‘Bias’
4.10 Possible Policy Recommendations
4.11 Concluding Comments
Exercises
Notes
5 Valuation for Lending Purposes and Long‐Term Value Concepts. 5.1 Introduction
5.2 Two Competing Theories About Predictability of Property Prices
5.3 Price Bubbles on the Real Estate Market
5.4 The Leverage Cycles and Bank Incentives
5.5 Use Market Value, Make Risk Analysis and Adjust the Loan‐to‐Value Ratio (LTV‐Ratio)
5.5.1 Risk Related to the National Economic Situation and the Capital Market
5.5.2 Risk Related to the Local Economic Situation
5.5.3 Risk Related to Climate Change
5.5.4 Risk Related to Specific Characteristics of the Property
5.5.5 But Are These Risks Already Capitalized into the Price?
5.6 ‘Long‐Run Value’ as an Alternative
5.7 Alternative Value Concept (1) Mortgage Lending Value
5.8 Alternative Value Concept (2) Worth or (Normalized) Investment Value
5.9 Derivatives of Market Value
5.10 Cost‐Based Value Concepts
5.11 Final Comment: Can Valuation Methods and Credit Rules Affect the Property Cycle?
Exercises
Notes
6 Valuation for Financial Reports and Other Accounting‐Related Issues. 6.1 Introduction
6.2 The Fair Value Concept
6.3 The Fair Value Hierarchy, Disclosure Requirements and the Risk for Bias
6.4 Valuation of Public Sector Properties
6.5 Property Depreciation, Refurbishments and Free Cash Flows to the Property Firm
6.6 Auditing and Quality Assurance of Fair Values in Financial Reporting
6.7 Concluding Comments About Fair Values
Exercises
Notes
7 Property Valuation and Sustainable Buildings
7.1 Introduction
7.2 What Is a Green/Sustainable Building – on Environmental Certification Systems
7.3 How Sustainability Can Affect Property Values. 7.3.1 From an Investment Value Perspective
7.3.2 From a Portfolio Perspective and Brand Perspective
7.3.3 From a Climate Change Perspective
7.4 Valuation Methods and Sustainable Buildings
7.5 The Relation Between Values of ‘Green’ and ‘Brown’ Buildings. 7.5.1 Short‐Run and Long‐Run
7.5.2 From a Real‐Option Perspective
7.6 Concluding Comments
Exercises
Note
8 Transparency Issues
8.1 Transparent and Rational Markets. 8.1.1 Historical Background
8.1.2 JLL´s Transparency Index
8.1.3 An Example of an Organization That Really Tries to Be Transparent
8.1.4 How Transparent Can a Market Be?
8.2 Transparent Valuation Reports
8.3 Concluding Comments
Exercises
Notes
9 Valuation Ethics, the Role of the Valuer and Governance. 9.1 The Importance of Valuation and Basic Ethical Rules
9.2 The Responsibility of Valuers and Valuation Firms
9.2.1 Property Crises
9.2.2 Sustainability
Example 9.1 The Real Estate Company Vasakronan
Example 9.2 The Property Advisor JLL
Example 9.3 SVEFA (A Company That Has Property Valuation as One Core Business)
9.3 Authorization/Certification of Valuers
9.4 Concluding Comments
Exercises
Note
10 Property Valuation in the Future
10.1 Technological Development
10.1.1 Big Data and Data Collection
10.1.2 AI
10.1.3 The Demand for Valuers
10.1.4 Some Reservations
10.2 Structural Changes in Society: Corona‐Pandemic as an Example
10.3 Radical Uncertainty and Property Valuation
Exercises
Appendix A Can the Value of a Property Be Divided into Value of the Parts? A.1 Introduction
A.2 Dividing the Value into Land Value and Building Value for Homes and Commercial Buildings. A.2.1 Building Value as Residual
A.2.2 The Land Value as Residual
A.2.3 Using Statistical Methods
A.2.4 Dividing Property Values into Components for Accounting Purposes
A.2.5 Conclusion
A.3 Dividing the Value into Farmland and Farm Buildings
A.4 Dividing the Value into Property Value and ‘Business Enterprise Value’
A.5 Concluding Comment
Exercises
References
Index. a
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