Principles of valuation

Shapiro, Eric; Mackmin, David; Sams, Gary

doi:10.1201/9781315145419-1

Cited by 3 publications

(14 citation statements)

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“…Hayes (2021) stressed that the timing of annuity payment is based on “opportunity cost”; either the investor would like to receive the payment at the beginning or at the end of the years. In the income approach to valuation (income capitalization approach), the investor or owner of an income generating property is seen as purchasing an annuity (Ogunba, 2013; Shapiro et al ., 2019). Yearly, semi-annually, quarterly and monthly are the prevalent annuity (rent) intervals.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Rents on the property could be paid by tenants monthly, quarterly, half yearly or yearly. In the valuation of such property, there are various methods employed by valuers in estimating the worth of the properties: income approach (investment method), depreciated replacement cost method, direct market comparison method, profit method and the residual method (Sayce et al ., 2006; Wyatt, 2007; Blackledge, 2009; Enever et al ., 2010; Udechukwu, 2009; Shapiro et al ., 2019). In the theories and principles of valuation, the income capitalization approach or investment method is the appropriate method for valuing income generating properties.…”

Section: Introductionmentioning

confidence: 99%

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Application of income capitalization approach for emerging rental income cash flow in Enugu metropolis property market

Ifeanacho

Egbenta

2023

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Purpose 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.Design/methodology/approachThe 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.Findings 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.Research limitations/implicationsThe 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.Practical implicationsThe 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.Originality/value 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.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Application of income capitalization approach for emerging rental income cash flow in Enugu metropolis property market

Ifeanacho

Egbenta

2023

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“…However, it is now applied to only StMS shops and the argument is that: (1) window displays are unimportant for encouraging sales in large shops (VOA, 2016); (2) it has been found it is not possible to relate rents of StMS and large shops on a zoning approach, and it is difficult to find a connection between the two on a zoning method (Bond and Brown, 2018); and (3) the size of large shops will skew zoned analysis resulting in an unjustifiably high overall rent even with an evidence-based quantum allowance applied (Property Elite, 2021). Thus, large shops are valued at an overall price per m 2 to the whole of the sales area supported by analysis of reliable rental evidence that has been tested in the market (VOA, 2022; RICS-isurv, n.d; Shapiro et al. , 2019; Bond and Brown, 2018) and Bond and Brown (2018) add lesser figures are applied to ancillary accommodation.…”

Section: Zoning Approach Of Rental Analysis In Valuation Of Shopsmentioning

confidence: 99%

“…Zoning is premised on the well-known assertion that it is shop fronts including windows, which attract customers to a shop and, therefore, the space within the shop at the frontage is the most valuable part of the shop as that is where most trading takes place and decreases backwards. For instance, according to Shapiro et al. (2019) the front area of a shop including windows is the part that attracts customers and, therefore, the most valuable part as it provides the most prominent selling space with the value per unit area reducing as the distance away from the shop increases whilst Bond and Brown (2018) note in most cases, shopkeepers make a greater proportion of sales from goods displayed at the front than the rear.…”

Section: Introductionmentioning

confidence: 99%

“…These are comparative, investment, profits, depreciated replacement cost and residual valuation methods. The comparative valuation method, which is the most widely used technique compares the subject property to be valued with similar properties that have recently been sold or rented in the open market and allowing for differences like location and other characteristics between the subject property and comparable properties in order to determine the capital or rental value of the subject property (Scarrett and Osborn, 2019; Shapiro et al. , 2019; Isaac and O'Leary, 2017).…”

Section: Introductionmentioning

confidence: 99%

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Relevance of zoning small to medium size (StMS) shops in contemporary English valuation surveying practice in Newcastle upon Tyne, England

Abdulai

2023

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PurposeIn English valuation practice, when valuing small to medium size (StMS) shops, rental analysis is undertaken using zoning based on the argument that shop fronts including window displays attract customers to shops and that most trading takes place in the internal frontage area making it the most valuable part of shops. Albeit zoning has been critiqued, it remains the preferred method of rental analysis. The paper aims to answer two research questions: are shop fronts including window displays the only factor that attracts customers to shops? And is the frontage space within shops the area most trading takes place?Design/methodology/approachThe exploratory qualitative research methodology was used, and primary data collected by observing 178 shops in selected five shopping areas. The observational data were complemented with the use of secondary data.FindingsThe study has shown that shop fronts are not the only factor attracting clientele to shops as there are other varied factors including location, availability of Internet and hoardings. There is no evidence to suggest most goods in shops are displayed at the frontage space that attract most customers to that area, thereby, making the area the most valuable part, which decreases backwards.Practical implicationsThese findings coupled with extant research evidence implies zoning can lead to under or over valuation of StMS shops (which is not good for retail real estate (RE) management or market), and turnover generated from shops is the overarching determinant of rental values in valuation.Originality/valueThis is the first time the very foundation/underpinning principles of zoning have been subjected to scrutiny in England.

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Assessment of Damage Caused by the Reduction of Daylight Lighting Duration of Residential Constructions in the Conditions of the Republicof Moldova

Svetlana

Иванов

Albu

2023

Real Estate Management and Valuation

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This paper examines the material damage caused to the owner of the property as a result of the violation of the design rules. This phenomenon was observed by the authors participating in the period 2018-2021 in the assessment of over 500 construction projects of residential blocks on the territory of the Republic of Moldova. In about 50% was found a violation of lighting regulations. Through this study, we aimed to investigate the ways to assess the extent of the damage caused by the reduction of the level of daylight lighting in residential buildings in the specific conditions of the real estate market in the Republic of Moldova. This paper aims to: Identify the legislative and normative framework that regulates the process of ascertaining the damage caused to the owner of the residential real estate following the reduction of the level of sunshine and natural lighting; Determine the consequences of reducing the level of sunshine and natural lighting for residential buildings; Propose methods for estimating the material damage caused to the owner of the damaged real estate under the conditions of the Republic of Moldova.

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Principles of valuation

Cited by 3 publications

References 0 publications

Application of income capitalization approach for emerging rental income cash flow in Enugu metropolis property market

Application of income capitalization approach for emerging rental income cash flow in Enugu metropolis property market

Relevance of zoning small to medium size (StMS) shops in contemporary English valuation surveying practice in Newcastle upon Tyne, England

Assessment of Damage Caused by the Reduction of Daylight Lighting Duration of Residential Constructions in the Conditions of the Republicof Moldova

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