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Valuation Accuracy - A Problematic Enquiry

Author

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  • Kwame Addae-Dapaah

Abstract

Criticisms from within and without the appraisal fraternity have led to a quest for ìaccurateî valuations. Studies that hitherto have been done on the issue have given conflicting results. While some studies (e.g. Drivers Jonas/IPD, 1988, 1990, 1992 & 1997; Brown 1985 & 1992) have found valuations to be ìaccurateî, others (e.g. Hager and Lord, 1985; Lizieri and Venmore-Roland, 1991) give contrary conclusions. Those who question the accuracy of valuations have used statistical methods to prove valuation error, bias, etc. Using existing criteria for measuring valuation ìaccuracyî, and data from Singapore, this paper replicates the finding of valuation error, bias, etc to some extent. However, it is argued both theoretically and empirically (with examples where possible) that the criteria for determining ìaccuracyî is highly questionable consequent on which the valuation error, bias, etc conclusion could be seriously flawed. The paper concludes that in view of the appraisal foundations, theory of value, and the nature of the property market, it may be more rewarding to concentrate on ways and means of reducing valuation variation. It is cautioned, however, that the resulting reduction may be very moderate.

Suggested Citation

  • Kwame Addae-Dapaah, 2001. "Valuation Accuracy - A Problematic Enquiry," ERES eres2001_101, European Real Estate Society (ERES).
  • Handle: RePEc:arz:wpaper:eres2001_101
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    References listed on IDEAS

    as
    1. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    2. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    3. David Friday, 1922. "An Extension of Value Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 36(2), pages 197-219.
    4. Neil Crosby & Anthony Lavers & John Murdoch, 1998. "Property valuation variation and the 'margin of error' in the UK," Journal of Property Research, Taylor & Francis Journals, vol. 15(4), pages 305-330, January.
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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