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A more transparent two-step categorization of valuation methods

Author

Listed:
  • Lind, Hans

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Nordlund, Bo

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

Valuation methods are usually divided into sales comparison, income and cost approach. A problem with this categorization is that direct capitalisation methods often are classified as part of an income approach as the same time as they can be based on comparable sales. In the proposed categorisation the starting point is two ways to connect to the market: either through comparable sales or through knowledge about how actors think. For each of these methods the strategic variable used can be either price, income or cost. In the second step adjustments are made and in the article four different methods for doing this is identified. The articles also clarifies where the Discounted Cash Flow methods fits into these categorizations.

Suggested Citation

  • Lind, Hans & Nordlund, Bo, 2013. "A more transparent two-step categorization of valuation methods," Working Paper Series 13/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2013_011
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    More about this item

    Keywords

    Valuation methods; Sales comparison approach; Income approach; Cost approach; Discounted Cash Flow methods; international comparison;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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