Ewa Kucharska-Stasiak

An Attempt To Exemplify The Economic Principles In Real Property Valuation

Abstract The economic theory argues that the value of assets, including the value of real property, is influenced by many factors which determine the behavior of operators engaged in market transactions. The knowledge of basic principles and assumptions which underpin the development of value is essential to understanding the methods and procedures of valuation. The thesis, upon which the authors of this article based their theoretical and practical considerations, is formulated as follows: “The knowledge of economic principles of valuation improves the accuracy of valuation and allows for more appropriate interpretation of its results”. Therefore, these factors should be taken into account by appraisers estimating the value of property. Over a dozen so-called key principles of valuation have been formulated in literature. Among them are the principles of anticipation, change, substitution, supply and demand, competition, balance, highest and best use, conformity, and externalities. It is assumed that the most important principle in the valuation of property is the principle of anticipation. Some of the principles are relevant to all the traditional approaches to determining value, while others apply only to selected approaches e.g., the principle of opportunity cost, which is mainly used in valuations using the income approach. The thesis is supported by research results and an analysis of practical examples.

15 Myths about Market Value

Abstract Market value is one of the most difficult notions in economics. It is also one of the most puzzling in the valuation industry, although its definitions can be found in the International Valuation Standards, European Valuation Standards, RICS standards and national standards. This value tends to be given different interpretations and misconceptions surrounding it are shared by many members of the property valuer community. The many ways in which property market value is understood leads to misvaluations and significant variations between valuation results, which are damaging to the prestige of the property valuation profession. This article explores areas giving rise to the misinterpretations of property market value to provide a critical review of the existing views, and to put forward arguments explaining why they should be revised. To this end, a critical literature review and observations made by the author during discussions with valuation professionals taking skill-improvement courses, scientific conferences on valuation methodology and practice, and entry exams for the profession of property valuers are used. Three main areas conducive to the emergence of myths have been identified: the interpretation of property market value (four myths), the process of arriving at property market value (ten myths) and the interpretation of valuation results (one myth). The myths are challenged on the grounds of the market value concept and its interpretation as used in economics.

Forms and Effectiveness of the Client's Influence on the Market Value of Property - Case Study

Abstract Although real estate valuation is supposed to make the market transparent, it has been noted to be partial in many countries. Analysis of literature and results of the statistical analysis of survey responses of Polish property appraisers indicated that: Property valuers operate in an environment which exerts influence on the final result of valuation. The attempts of the client to influence the valuation process and their effectiveness do not depend on the gender and age of the property appraiser. The problem of valuation bias should be seen in the weakness of the system enforcing compliance with ethical standards, with this being an area which requires reinforcement in many countries.

Reflecting Sustainability in Property Valuation - Defining the Problem

Abstract A major topic in discussions about environmental protection is the concept of sustainable development utilizing the economic criteria enhanced by environmental, social and ethical aspects. The concept inspired a new approach to construction and paved the way for the idea of sustainable buildings. Sustainable buildings are expected to offer economic benefits to their owners and tenants that should be reflected in property values. The authors test a hypothesis that the real estate market in Poland still fails to incorporate sustainability in property valuation. The article seeks evidence in support of this hypothesis, as well as attempting to find out why the market does not pay a premium for sustainability. To accomplish the purpose of the research, a systematic literature review, an analysis of the pilot studies available in Poland and a preliminary assessment of the ability of valuation methods to reflect sustainability in property valuations are performed. The focus of the research is on the office property market, one of the fastest growing and most modern segments of the real estate market. The conclusion drawn from the research is that, of all respondents surveyed by international studies, Polish developers, property owners, tenants and valuers know the least about sustainable building and that the evidence of the benefits of sustainable building is still unavailable in the Polish real estate market. Such benefits are rather hypothesized to exist and considered theoretically rather than empirically confirmed. It is possible that the reasons for these findings are the short period of research and problems with distinguishing sustainable buildings from conventional ones, which make it difficult for valuers to reflect the benefits of sustainability in valuations. Nevertheless, a new approach to property valuation encompassing environmental, ethical and moral aspects seems necessary. This would encourage sustainable building and green investment strategies. Sustainable valuation would also be an opportunity for the development of the valuation profession.

Selected Aspects of Real Estate Appraisers' Professional Training on the background of Economic Theory

Th is study is aimed at presenting the role of economic principles in the real estate valuation process raised in appraisal theory. Th e formulated theses suggest that the reasons for not appreciating economic issues in the appraisal process should be sought in the education system of persons authorised to perform real estate appraisals. In order to research how economy theory was adapted by appraisal theory and practice, several commonly available information sources were reviewed. Th e table shows the kinds of principles, in the order mentioned by the authors of studies. Some information about education system of property valuers in Poland and Lithuania was discussed. In order to verify how the appraisal principles described herein are used in practice, a survey was conducted among Polish appraisers. Th e Polish respondents’ answers confi rm the diagnosis of the article’s authors as to the necessity to devote more time to these issues when preparing candidates for the profession of property appraiser.

Reproduction of Real Estate Valuation Methodology in Practice. An Attempt at Identifying Sources of Divergences

Abstract The objective of the study is to try and identify the reasons for the detachment of the valuation practice from its methodology. Two methods have been used in the paper: the analysis method and the case study method, under which fourteen property valuation reports posted on websites and two opinions about the property valuation prepared for court purposes in order to detect and identify sources of deviations from the valuation methodology have been analyzed. The study, besides theoretical aspects, includes references to practical application: pointing out directions of changes in legal regulations and national valuation principles, which should help achieve uniformity in interpreting the valuation concept, allowing the reduction of its uncertainty, understood as the uncertainty of a single valuation and uncertainty as the difference between valuations.