Property Valuation

This new edition of the 'all in one' textbook for the postgraduate study of valuation on real estate courses retains its focus on the valuation and appraisal of commercial and industrial property across investment, development and occupier markets. It is structured from the client perspective and covers single-asset pricing, risk and return issues. The structure of the book has been substantially revised. Part A introduces the key microeconomic principles, focussing on land as a resource, production functions, supply and demand and price determination. The locational aspect of real estate is also introduced. Macroeconomic considerations are categorised by the main market sectors (and their function); the market for land (development), for space (occupation) and for money (investment). The economic context is set and the author then explains why property valuations are required and discusses the main determinants of value and how they might be identified. The mathematics required to financially quantify value determinants are also introduced. Part B of the book describes the methods of valuation; Part C applies these methods to the valuation of a range of property types for a wide variety of purposes; and Part D covers investment and development appraisal. The author introduces valuation activities from a broad economic perspective, setting valuation in its business finance context and combining its academic and practical roots. Changes in this second edition include: less daunting economics expanded companion website with PowerPoint slides for lecturers, self-test Questions & Answers for students: see href="http://www.wiley.com/go/wyattpropertyvaluation">www.wiley.com/go/wyattpropertyvaluation up-to-date case studies and sample valuations reference to the newly-published Red Book (the valuer's bible) Property Valuation with its user-friendly format, using tried-and-tested teaching and learning devices and a clear writing style, remains the core text for students on real estate, estate management and land economy degree courses, as well as for fast-track conversion courses for non-cognate graduates.

Auteur

Peter Wyatt is a Chartered Valuation Surveyor who has conducted extensive teaching, consultancy and research in land management and valuation. Currently Director of Undergraduate Programmes for Real Estate & Planning at the University of Reading, he has developed and delivered national and international university programmes at all levels, has published widely in leading real estate journals and has published two text books. Dr Wyatt has been involved with and lead national, European and international real estate research projects. Recent projects have investigated the way in which key attributes of the domestic and non-domestic building stock affect value; in particular energy consumption, environmental labelling and public transport accessibility. Ongoing work with UK Government is investigating the theory and practice of development viability appraisal in planning policy, focusing on the issue of development value and planning gain.

Contenu

Preface xiii

Acknowledgements xv

PART A PROPERTY VALUE AND PROPERTY VALUATION 1

1 Microeconomic Concepts 3

1.1 Supply and demand, markets and equilibrium price determination 3

1.2 The property market and price determination 6

1.2.1 Rent for land 6

1.2.2 Land use rents 8

1.2.3 Land use intensity 12

1.3 Location and land use 14

1.4 The economics of property development 22

1.4.1 Type and density of property development 22

1.4.2 The timing of redevelopment 25

Notes 28

References 29

2 Macroeconomic Considerations 31

2.1 The commercial property market 31

2.2 Property occupation 33

2.3 Property investment 34

2.4 Property development 43

2.5 Property and the wider economy 44

References 48

3 What is Property Valuation 49

3.1 Introduction 49

3.2 The need for valuations 50

3.2.1 Types of property to be valued 52

3.2.2 Bases of value 57

3.3 Determinants of value 60

3.3.1 Property-specific factors 60

3.3.2 Market-related factors 66

3.4 Valuation procedures 69

3.4.1 Terms of engagement 71

3.4.2 Inspections and investigations 71

3.4.3 Valuation report 73

3.5 Measurement 73

Appendix Inspection checklist 76

Notes 81

References 81

4 Valuation Mathematics 83

4.1 Introduction 83

4.2 The time value of money 84

4.2.1 Single period investments 85

4.2.2 Multi-period investments 86

4.2.3 Tax 93

4.3 Yields and rates of return 94

4.3.1 Yields 95

4.3.2 Rates of return 96

4.3.3 Yields and rates of return 98

References 99

PART B VALUATION METHODS 101

5 Comparison Method 103

5.1 Introduction 103

5.2 Sources of data 104

5.3 Comparison metrics 106

5.3.1 Relative value of retail ground floor 'zones' 107

5.4 Comparison adjustment 110

References 114

6 Investment Method 115

6.1 Introduction 115

6.2 All-risks yield (ARY) methods 117

6.2.1 Valuation of rack-rented freehold property investments 117

6.2.2 Valuation of reversionary freehold property investments 119

6.2.3 Valuation of leasehold property investments 127

6.2.4 Example: ARY Investment method 134

6.3 Discounted cash-flow (DCF) methods 135

6.3.1 A discounted cash-flow valuation model 136

6.3.2 Applying the DCF valuation model 142

Notes 157

References 157

Further reading 158

7 Profits Method 161

7.1 Introduction 161

7.2 Method 162

7.3 Example of a profits method valuation 166

7.4 Summary 169

Notes 170

References 170

8 Replacement Cost Method 171

8.1 Introduction 171

8.2 Method 172

8.3 Application 178

8.3.1 Valuation of an owner-occupied property for accounts purposes 178

8.3.2 Valuation for insurance purposes 178

8.4 Issues 178

8.4.1 Definitional problems 179

8.4.2 Methodological problems 181

8.5 Summary 184

Notes 185

References 186

9 Residual Method 187

9.1 Introduction 187

9.2 Conventional residual land valuation 188

9.3 Problems with the residual method 199

9.4 Cash-flow residual model 202

References 206

10 Automated Valuation Models and Computer-Assisted Mass Appraisal 207

10.1 Introduction 207

10.2 Method 207 10.2.1 Simpl...