The Income Approach to Property Valuation

Baum, Andrew; Mackmin, David; Nunnington, Nick

doi:10.4324/9780080966915

Cited by 17 publications

(22 citation statements)

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“…Other authors like Chan and Harker (2012), Baum et al (2011), Mackmin (2008, Crosby (2008 and1995), Gane (1995), Baum and Butler (1986), Trott (1986), Baum and Ming (1985), Bowcock (1983), Harker (1983), Enever (1981), Mackmin (1979), andFraser (1977) have also argued against the use of the model. In the words of Mackmin (2008, p.92), for example:…”

Section: )mentioning

confidence: 99%

“…It appears the proponents of the dual rate principle have chosen to ignore the reinvestment fallacy (Robinson, 1989). The dual rate approach is outdated and hence an unsupportable method for assessing the market value of leasehold interests (Baum et al, 2006).…”

Section: )mentioning

confidence: 99%

“…In the UK, however, leaseholds are traditionally valued using the YP [Dual Rate] model (Chan and Harker, 2012, p.107) and indeed, the authors' interaction with some UK real estate industry practitioners in recent times confirms the observation of Chan and Harker. As Baum et al (2011) and Mackmin (2008) aptly note, in the UK and the followers of UK practice, there has been and continues to be a battle between people wedded to the dual rate principle [see for example, Shapiro et al (2013) and Johnson et al (2000)] and those wedded to the single rate principle [see for example, Mackmin (2008) and Baum et al (2006)]. …”

Section: Introductionmentioning

confidence: 99%

“…In most countries, the debate has been closed (Baum et al, 2011). In Australia, for example, the model is not used by the real estate industry (Whipple, 2006) and similarly, the US School of valuation does not use it (Fisher and Martin, 2004;Keating, 1998;North, 1984).…”

Section: Introductionmentioning

confidence: 99%

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Relevance of the use of YP[Dual Rate] in the Valuation of Leasehold Interests in Contemporary English Practice

T¹,

Owusu‐Ansah²,

Subroweit³

et al. 2013

Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria

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The purpose of this paper is to: (i) empirically investigate the extent to which the use of the YP [Dual rate] model for leasehold valuation actually reflects market agents' behaviour in England; and (ii) systematically examine its impact on leasehold valuations. The qualitative research methodology was adopted where interviews were conducted face-to-face and via phone with 105 purchasers of leasehold interests in Cressington Heath neighbourhood of Liverpool in 2012. QSR NVIVO 10 was used to code the data for analysis. It has been established that purchasers of leasehold interests do not make provision for an ASF in practice. Indeed, the method adopted is the direct opposite of what the model positspurchasers use debt capital to procure property after which they commence amortising the loan periodically. There are also other approaches that can be used to make provision for a future expense and it is surprising the focus is on only the ASF method. Using the model to value, particularly, short leases leads to significant undervaluation, especially, when taxation is introduced. For very long leases, however, it does not actually matter whether it is YP [Perpetuity] , YP [Single rate] , YP [Dual rate] or YP [Dual rate adjusted for tax] that is used as the resultant valuation will be the same.

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Section: )mentioning

confidence: 99%

Section: )mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Relevance of the use of YP[Dual Rate] in the Valuation of Leasehold Interests in Contemporary English Practice

T¹,

Owusu‐Ansah²,

Subroweit³

et al. 2013

Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria

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“…Next, it is necessary to make deductions deriving from the interest on the capital that the user involved in the trade activity carried out on the property and his/her remuneration for its management. The amount remaining after the adjustments is defined as a "divisible balance" and constitutes the value to be respectively divided between the user and the property owner (SCARRETT 2008;BAUM et al 2006). The "divisible balance" is very often divided equally between the parties, but in fact, it should reflect the participation of each party in the success of the trade-related activity on the property.…”

Section: The Principles Of Fuel Station Valuation In the Ukmentioning

confidence: 99%

Fuel Station Valuation under Polish and RICS Standards

Czaplińska¹,

Rymarzak

Trojanowski

2017

Real Estate Management and Valuation

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In the last few years, there has been a visible change in the structure of the fuel station market in both Poland and the United Kingdom. The changes taking place both in the fuel station market structure and the management forms of fuel stations, along with the increasing significance of convenience goods sales, result in the necessity of verifying the existing Polish valuation standards of the income approach. Moreover, there is an urgent need to develop specific fuel station valuation guidelines. Fuel station valuation requires both the specific approach and profits method adjustment to be able to account for the specificity of the valuation. The universal character of property valuation in Poland cannot result in ignoring the specificity of fuel station valuation and the market where it operates. Property valuers undertaking valuations of this type of facilities must be familiar with the rules operating on the fuel station market. This paper focuses on the comparison analysis of the fuel station market structure in Poland and the United Kingdom along with the specificity of the way fuel stations operate. Its emphasis is on the comparison analysis of fuel station valuation methods under Polish and RICS standards in order to show their similarities and differences. The aim of the paper is to present the methods of fuel station valuation in Poland and the United Kingdom, though mainly to show the areas of changes in the Polish valuation standards with regards to the profits method under the income approach that would take into account the specificity of fuel stations and their market.

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An investigation of development appraisal methods employed by valuers and appraisers in small and medium sized practices in Brazil

Greenhalgh

Bendel

2015

Journal of Property Investment &Amp; Finance

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Purpose – 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. Design/methodology/approach – 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. Findings – 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. Research limitations/implications – 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. Practical implications – 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. Originality/value – 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.

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The Income Approach to Property Valuation

Cited by 17 publications

References 0 publications

Relevance of the use of YP[Dual Rate] in the Valuation of Leasehold Interests in Contemporary English Practice

Relevance of the use of YP[Dual Rate] in the Valuation of Leasehold Interests in Contemporary English Practice

Fuel Station Valuation under Polish and RICS Standards

An investigation of development appraisal methods employed by valuers and appraisers in small and medium sized practices in Brazil

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