Real Estate Management and Valuation
Latest articles in this journal
Real Estate Management and Valuation, Volume 28, pp 63-80; doi:10.1515/remav-2020-0032
This study is a design of an alternative real value hybrid model for the valuation of reversionary leasehold investment properties characterized by divergence in the revision period of sub-rent and head rent respectively. The development of this model commenced with a synthesis of inputs for the modified rational- and real value hybrid models, and the derivation of an equivalent cash flow multiplier for terminal investments. With exception of the generic real value model, term incomes across all other contemporary models including the alternative real value hybrid model were discounted using the equated yield. The discounted reversionary cash flows in the valuation template associated with the alternative real value hybrid model appears identical to that in the generic real value model, while exhibiting itself as a surrogate reversionary income multiplier for the modified rational, and the real value/short-cut DCF models respectively. The alternative real value hybrid model was validated as capable of producing valuations that are identical to those churned out from all the existing contemporary models for the valuation of this category of reversionary leasehold investment property. The study is a novel attempt towards redesigning the modified rational model of leasehold investment property valuation and according it a real value perspective.
Real Estate Management and Valuation, Volume 28, pp 24-32; doi:10.1515/remav-2020-0029
The paper aims to investigate factors connected with the residential satisfaction of the adolescents and to compare them with the factors influencing residential satisfaction among adults. The primary research was conducted in secondary schools in the Bialystok Functional Area. The data was analyzed using descriptive statistics and a multinomial logistic regression model. The results show that living standards are a crucial issue in residential satisfaction. Living in an owner-occupied dwelling and having one’s own room reduced the likelihood of being dissatisfied with housing.
Real Estate Management and Valuation, Volume 28, pp 1-14; doi:10.1515/remav-2020-0027
Every real-estate related investment decision making process calls for the careful analysis of available information even though it is often carried out in conditions of uncertainty. The paper attempts to minimize the impact of the factor on the quality of real estate investment decisions through the proposal of application of tools based on the simulation of the process of natural selection and biological evolution. The aim of the study is to analyze the potential of methodology based on genetic algorithms (GA) to build automated valuation models (AVM) in uncertainty conditions and support investment decisions on the real estate market. The developed model facilitates the selection of properties adequate to the adopted assumptions, i.e. individuals best suited to the environment. The tool can be used by real estate investment advisors and potential investors on the market to predict future processes and the proper confrontation of past events with planned events. Even though genetic algorithms are tools that have already found particular application on real estate market, there are still areas that need further studies in the case of more effective uses. The obtained results allow for the possibilities and barriers of applying GA to real estate market analyses to be defined.
Real Estate Management and Valuation, Volume 28, pp 33-47; doi:10.1515/remav-2020-0030
Determining the impact of individual attributes on the value or price of real estate in business practice poses many problems. One of the solutions to this problem is the use of statistical methods. The article proposes correlation coefficients (and their partial modifications) that can be used to determine the impact of selected features on the value of real estate. In addition, several procedures were taken into account for the factors in further calculations, using different methods for determining weights. Empirical verification of the proposed solutions was based on the mass valuation of land properties. The obtained results were compared with valuations developed by property appraisers and valuation errors were calculated. Based on valuation errors, the proposed methods of calculation procedures were ranged, indicating those which provide results closest to the individual valuations carried out by property appraisers.
Real Estate Management and Valuation, Volume 28, pp 15-23; doi:10.1515/remav-2020-0028
Although deep learning-based valuation models are spreading throughout the real estate industry following the artificial intelligence boom, property owners and investors continue to doubt the accuracy of the results. In this study, we specify a neural network for predicting house prices. We suggest a standard feed-forward network with two hidden layers, and show that it is sufficiently reasonable to apply its prediction to real-world projects such as property valuation. In addition, we propose a Bayesian neural network for describing uncertainty in house price predictions while providing a means to quantify uncertainty for each prediction. We choose Gangnam-gu, Seoul for the analysis, and predict house prices in the area using both networks. Although the Bayesian neural network did not perform better than the conventional network, it could provide a tool to measure the uncertainty inherent in predicted prices. The findings of this study show that a Bayesian approach can model uncertainty in property valuation, thereby promoting the adoption of deep learning tools in the real estate industry.
Real Estate Management and Valuation, Volume 28, pp 81-92; doi:10.1515/remav-2020-0033
The introduction of the property value tax in Poland may lead to an increase in the tax burden on real estate. Pilot studies may be carried out on samples and the results should feature a high degree of certainty as to the extrapolation of the results on populations (e.g. entire municipalities). Each study may, for various reasons, include outliers in the analyzed data sets. If their presence results from measurement errors or other reasons that cause such observations not to be the result of naturally occurring processes, they should be omitted in the calculations, because they interfere with the study of the occurring regularities.The study presents the results of statistical modelling carried out to determine whether individual objects (land properties), due to their attributes, are at risk of increasing the tax burden as a result of the introduction of ad valorem tax. First, logistic regression model estimation was carried out for the entire set of analyzed properties. Next, several methods of outlier detection were applied, and model estimation was repeated without the observations, i.e. real estates, pointed out as abnormal.The objective of the study is to verify the usefulness of outlier detecting methods in the context of improving the classification results of the analyzed properties.
Real Estate Management and Valuation, Volume 28, pp 93-103; doi:10.1515/remav-2020-0034
The article identifies and provides a synthetic overview of various concepts relating to the evolution of the real estate market and property valuation. According to the authors, the processes observed on the real estate market necessitate changes in training programs for property valuers. Real estate appraisers should be able to cope with new consumer expectations and requirements, and they should be well versed in modern technological solutions and analytical tools. The study indicates that, in order to face the challenges of the modern world, the appraisal profession should undergo a paradigm shift to embrace the fact that real estate is a commodity and that globalization is inevitable on the real estate market. Due to the high value of urban areas, a modern specialist determining the value of real estate is particularly needed there. Property valuers should develop new analytical skills, and they should rely on modern data processing tools to collect and process information. Additionally, recent events, including the COVID-19 pandemic, demonstrate that property appraisers should be better prepared for dealing with unprecedented circumstances. The training curricula proposed in this article should increase property valuers’ competencies and effectively support real estate market entities and sustainable urban development.
Real Estate Management and Valuation, Volume 28, pp 48-62; doi:10.1515/remav-2020-0031
Real estate development investments are characterized by a high value of projects, which in the event of irregularities in their implementation may result in significant losses for the economy. The lack of tools enabling ongoing control of real estate developers may result in disruptions in the operation of business entities on the real estate market, affecting the proper functioning of many stakeholders. The article proposes a method of measuring value for real estate companies. Accounting principles that regulate financial statements specify that they cannot be used directly to measure the value of a developer. The article proposes examples of corrections to financial statements supporting value measurement. When calculating value management measures, (i) adjustments excluding the impact of asset valuations, (ii) adjustments of settlement negative EVA of the investment phase, (iii) adjustments of advance payment of NPV of the project, and (iv) adjustments of excluding the impact of interest on foreign capital should be made. Examples of using these adjustments in a short-term housing project and a long-term commercial project were presented. The impact of the proposed adjustments on the comparison of formal financial statements and value measures for a large developer listed on the WSE was also discussed.
Real Estate Management and Valuation, Volume 28, pp 65-76; doi:10.1515/remav-2020-0024
The importance of local plans for developers and negative consequences of issuing a large number of decisions on building conditions are usually discussed in literature, with the role of the study of conditions and directions of the spatial development of the commune somewhat diminished in this respect. The question therefore arises whether the study itself is important for the growth of developers’ activity and, if so, whether its provisions are adhered to.Therefore, the purpose of this article is to assess the impact of the study of conditions and directions of spatial development of the commune on developers’ activity based on the example of Łódź. The author formulates a hypothesis that, from the point of view of developers’ activity, it is a document of little importance, because its decisions are not abided by entities issuing BC decisions. To achieve the assumed goal, the following research methods were used: desk research analyzing the studies of conditions and directions of the spatial development of Łódź from 2010 and 2018, as well as gathering information on development investments from various online sources, and a comparative analysis of the location of development investments in the context of both mentioned documents.
Real Estate Management and Valuation, Volume 28, pp 12-23; doi:10.1515/remav-2020-0020
The purpose of the paper is to investigate the main causes of discount between list price and forced sale value in the Italian real estate auction segment, in favor of more comprehensive determination of the value of mortgage underlying guarantees; this would allow for an improvement of further valorization processes of assets intended to obtain a higher selling price.Starting from the results of existing literature, an ordinary least squares regression analysis was conducted in order to point out the main determinants of the discount between list price and forced sale value. It has been verified, when sampling 225 cases of forced residential property sales in the South of Italy, that the time constraint of the Italian regulatory framework is more relevant with reference to discount rather than the physical characteristics of assets.The influence of the duration of procedures is proof that even if recent government initiatives have led to positive results in terms of reducing the length of procedures, this is not yet satisfactory compared to other European contexts. This provides evidence of the need for further interventions aimed at improving the efficiency of the procedural system, also encouraging recourse to other options that lead to ease judicial burden.