IDEAS home Printed from https://ideas.repec.org/a/vrs/remava/v27y2019i2p66-76n6.html
   My bibliography  Save this article

Valuation Schools and the Evolution of the Income Approach. An Evaluation of Change Trends

Author

Listed:
  • Kucharska-Stasiak Ewa

    (Department of Investment and Real Estate, University of Lodz)

Abstract

The income approach is the subject of debates conducted by academics and practitioners as one of the most controversial approaches in valuation practice. It is also somewhat differently understood by the three historically shaped valuation schools (US, British and German). This article compares the main assumptions underpinning the income approach’s investment method between the three schools in order to: 1) determine why the assumptions change and in what direction; 2) assess the advantages and disadvantages of explicit cash flows; and 3) evaluate the advisability of incorporating explicit cash flows into Polish valuation methodology. A thesis is formulated that, in Poland, the investment method should use implicit cash flows for estimating the market value of properties. There is a need to include explicit cash flow in university programs, but their use should be limited to valuations undertaken to determine the investment value of a property or the market value of portfolio properties, as well as valuations carried out for the purposes of financial reporting as required by EU legislation (MSSF 13 and MSR 40).The article was prepared based on the review and analysis of the relevant literature.

Suggested Citation

  • Kucharska-Stasiak Ewa, 2019. "Valuation Schools and the Evolution of the Income Approach. An Evaluation of Change Trends," Real Estate Management and Valuation, Sciendo, vol. 27(2), pages 66-76, June.
    • Handle: RePEc:vrs:remava:v:27:y:2019:i:2:p:66-76:n:6
    DOI: 10.2478/remav-2019-0016
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/remav-2019-0016
    Download Restriction: no
    File URL: https://libkey.io/10.2478/remav-2019-0016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Waldo L. Born & Stephen A. Pyhrr, 1994. "Real Estate Valuation: The Effect of Market and Property Cycles," Journal of Real Estate Research, American Real Estate Society, vol. 9(4), pages 455-486.
    2. Kerry D. Vandell, 2007. "Expanding the academic discipline of real estate valuation," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 25(5), pages 427-443, August.
    3. Lasse Bork & Stig V. Møller, 2018. "Housing Price Forecastability: A Factor Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 46(3), pages 582-611, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jim Clayton, 1996. "Market Fundamentals, Risk and the Canadian Property Cycle: Implications for Property Valuation and Investment Decisions," Journal of Real Estate Research, American Real Estate Society, vol. 12(3), pages 347-368.
    2. Chien-Chiang Lee & Chin-Yu Wang & Jhih-Hong Zeng, 2017. "Housing price–volume correlations and boom–bust cycles," Empirical Economics, Springer, vol. 52(4), pages 1423-1450, June.
    3. Theodore Panagiotidis & Panagiotis Printzis, 2016. "On the macroeconomic determinants of the housing market in Greece: a VECM approach," International Economics and Economic Policy, Springer, vol. 13(3), pages 387-409, July.
    4. Charles Rahal, 2015. "Housing Market Forecasting with Factor Combinations," Discussion Papers 15-05, Department of Economics, University of Birmingham.
    5. Bork, Lasse & Møller, Stig V., 2015. "Forecasting house prices in the 50 states using Dynamic Model Averaging and Dynamic Model Selection," International Journal of Forecasting, Elsevier, vol. 31(1), pages 63-78.
    6. Kicki Björklund & Bo Söderberg, 1999. "Property Cycles, Speculative Bubbles and the Gross Income Multiplier," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 151-174.
    7. Tripathi, Sabyasachi, 2019. "Macroeconomic Determinants of Housing Prices: A Cross Country Level Analysis," MPRA Paper 98089, University Library of Munich, Germany.
    8. Taufiq Choudhry, 2020. "Economic Policy Uncertainty and House Prices: Evidence from Geographical Regions of England and Wales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(2), pages 504-529, June.
    9. Stig Vinther Møller & Thomas Pedersen & Erik Christian Montes Schütte & Allan Timmermann, 2024. "Search and Predictability of Prices in the Housing Market," Management Science, INFORMS, vol. 70(1), pages 415-438, January.
    10. Christou, Christina & Gupta, Rangan & Hassapis, Christis, 2017. "Does economic policy uncertainty forecast real housing returns in a panel of OECD countries? A Bayesian approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 50-60.
    11. Robin A. Howarth & Emil E. Malizia, 1998. "Office Market Analysis: Improving Best-Practice Techniques," Journal of Real Estate Research, American Real Estate Society, vol. 16(1), pages 15-34.
    12. Robert Edelstein & Desmond Tsang, 2007. "Dynamic Residential Housing Cycles Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 295-313, October.
    13. Maurizio d¡¦Amato & Paola Amoruso, 2018. "Application of a Cyclical Capitalization Model to the London Office Market," International Real Estate Review, Global Social Science Institute, vol. 21(1), pages 113-143.
    14. Paul E. Carrillo & Erik Robert De Wit & William D. Larson, 2012. "Can Tightness in the Housing Market Help Predict Subsequent Home Price Appreciation? Evidence from the U.S. and the Netherlands," Working Papers 2012-11, The George Washington University, Institute for International Economic Policy.
    15. Luis C. Mejia, 1999. "Availability of Credit and Loan Default: A Look at the Commercial Mortgage Supply Cycle," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 175-196.
    16. Max Kummerow, 1999. "A System Dynamics Model of Cyclical Office Oversupply," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 233-255.
    17. Stephan Bartke & Reimund Schwarze, 2021. "The Economic Role and Emergence of Professional Valuers in Real Estate Markets," Land, MDPI, vol. 10(7), pages 1-20, June.
    18. Monica Azqueta-Gavaldon & Gonzalo Azqueta-Gavaldon & Inigo Azqueta-Gavaldon & Andres Azqueta-Gavaldon, 2020. "Developing a real estate yield investment deviceusing granular data and machine learning," Papers 2008.02629, arXiv.org.
    19. Paul E. Carrillo & Eric R. Wit & William Larson, 2015. "Can Tightness in the Housing Market Help Predict Subsequent Home Price Appreciation? Evidence from the United States and the Netherlands," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(3), pages 609-651, September.
    20. Gunther Maier & Shanaka Herath, 2009. "Real Estate Market Efficiency: A Survey of Literature," SRE-Disc sre-disc-2009_07, Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business.

    More about this item

    Keywords

    real property valuation; valuation standards; income approach;
    All these keywords.

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:remava:v:27:y:2019:i:2:p:66-76:n:6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.