Małgorzata Renigier-Biłozor

Rating methodology for real estate markets - Poland case study

The development of the real estate market is conditioned by a variety of endogenous and exogenous factors. Selected factors determine the local character of the real estate market, whereas others contribute to its classification as one of the main branches of the national economy. Rapid economic growth and the search for new investment opportunities have turned the real estate market into a highly competitive arena where various players carry out diverse investment strategies. Investors search for similarities that would enable them to develop risk minimizing strategies. Ratings are a modern tool that can be deployed in analyses and predictions of real estate market potential. This paper proposes a methodology for developing real estate market ratings, and it identifies the types of information and factors which affect decision-making on real estate markets. The following research hypotheses are formulated and tested in the article: 1) a real estate market can be rated in view of its significance for the local and national economy, 2) real estate market ratings support market participants in the decision-making process.

The Effectiveness of Real Estate Market Versus Efficiency of Its Participants

The Effectiveness of Real Estate Market Versus Efficiency of Its Participants Real estate markets (REMs) may be classified as strong-form efficient, semi-strong-form efficient or weak-form efficient. Efficiency measures the level of development or goal attainment in a complex social and economic system, such as the real estate market. The efficiency of the real estate market is the individual participants ability to achieve the set goals. The number of goals is equivalent to the number of participants. Every market participant has a set of specific efficiency benchmarks which can be identified and described. In line with the theory of rational expectations, every participant should make decisions in a rational manner by relying on all available information to make the optimal forecast. The effectiveness of the real estate market is a function of the efficiency of individual market participants. This paper attempts to prove the following hypothesis: the effectiveness of a real estate market may be identified by analysing the effectiveness of its participants. The authors also discuss methods based on the rough set theory which can influence the efficiency and efficacy of market participants, and consequently, the effectiveness of the real estate market and its participants.

The Impact of Macroeconomic Factors on Residential Property Price Indices in Europe

Abstract This paper aims to determine the influence of selected variables on residential property price indices for the European countries, with particular attention paid to Italy and Poland, using a rough set theory and an approach that uses a committee of artificial neural networks. Additionally, the overall analysis for each European country is presented. Quarterly time series data constituted the material for testing and empirical results. The developed models show that the economic and financial situation of European countries affects residential property markets. Residential property markets are connected, despite the fact that they are situated in different parts of Europe. The economic and financial crisis of countries has variable influence on prices of real estate. The results also suggest that methodology based on the rough set theory and a committee of artificial neural networks has the ability to learn, generalize, and converge the residential property prices index.

Structure of a decision support subsystem in real estate management

Abstract This study proposes a decision support subsystem in real estate management. Owing to the complex and multi-layered character of the discussed problem, only selected aspects of real estate management are discussed in this paper. The described system will play the role of a relatively simple and effective “assistant” which is expected to maximize the effectiveness of a decision and shorten decision-making time. The author has made an attempt to develop a subsystem as an adviser to subjects operating in the real estate management. This system was developed accounting for and combining the classical economic and real estate market theories with the implementation of non-classical methods in the data mining category in an effort to increase its effectiveness. The rough set theory has been proposed as a tool that supports analytical processes. Fuzzy logic best reproduces expert knowledge, and it is one of the most effective tools for solving “vaguely defined” problems. The given work is an attempt to prove the hypothesis that: the reduction of uncertainty in the real estate management decision-making process is possible by the development of the advisory system based on the rough set theory. The main aim of this work is to increase the efficiency and efficacy of entities operating in the real estate management, thus influencing the effectivness of the entity and management.

Rating attributes toolkit for the residential property market

The growing significance of the real estate market prompts investors to search for factors and variables which support cohesive analyses of real estate markets, market comparisons based on diverse criteria and determination of market potential. The specificity of the real estate market is determined by the unique attributes of property. The authors assumed that developing real estate market ratings identifies the types of information and factors which affect decision-making on real estate markets. The main objective of real estate market ratings is to create a universal and standardized classification system for evaluating the real estate market. One from the most important problem in this area is collection of appropriate features of real estate market and development dataset. The main problem involves the selection and application of appropriate features, which would be relevant to the specificity of information related to the real estate market and create a kind of coherent system aiding the decision-making process. The main aim of this study is to elaboration set of variables (knowledge platform) that were used to elaborate the real estate market ratings. The results lead to obtain the necessary set of features that constitute essential information which describes the situation on the local real estate market.

Multi-Criteria Land use Function Optimization

Abstract Space as a public good should be used in a way that is consistent with recognized social, cultural, aesthetic, economical and ecological values. The optimization of space is associated with its limitations, thus it should be subjected to rational management. Optimizing the function of city space involves identifying the most mismatched features of the area and a proposal to convert them into functions best suited with respect to the existing natural and anthropogenic, social, economic and ecological conditions. The selection criteria of the optimal use of land will be presented, as well as the parameters characterizing them and the possibility of using chosen multi-criteria methods of analysis. Social, economic and ecological criteria adopted for the analysis are the basis for the sustainable development of an area and coincide with factors which ought to be taken into account during the development of land-planning documents.

The Valuation of Hope Value for Real Estate Development

Abstract In the valuation of a property subject to development, the valuer may consider the potential aspect of the value of both land to be improved and a building to be refurbished. These kinds of valuations are complex, especially when a prudent assessment of value is required. In general terms, all properties may have potential development which, in some cases, can be termed “hope”. In particular, uncertainty regarding the change in the legal framework may create expectations as to the uncertain variation of property value in the future. In these cases, it may be necessary to deal with hope value or future value, trying to reach the value of a property subjected to uncertain changes. Hope value is the difference between the existing use value and the price that the market might pay for future transformation. The main aim of the paper is the elaboration of a methodology to determine the hope value. In this work, a real option model for the valuation of hope value in the real estate market will be applied to a small sample of residential properties located in Olsztyn that are subject to possible transformation. The possibility of a transformation may create expectations and may influence the value of the property. Although the applications of these methods to real estate valuation are fairly recent, the International Valuation Standards have included real option theory in the income approach as a valuation method since 2011.

REAL ESTATE MARKET RATING – NEED OR NECESSITY?

Abstract Rating systems developed in Poland and other countries are generally used to evaluate the performance of businesses, organizations, institutions and even entire economies. Comprehensive solutions for assessing real estate markets and individual properties have never been proposed (several systems for evaluating mostly commercial real estate have been developed). This deficiency could be attributed to an absence of databases describing the real estate market and market changes as well as a shortage of coherent methods for analyzing real estate markets. In most cases, however, market phenomena may be difficult to classify because they involve behavioral, social and stochastic elements. This article analyzes the existing systems for rating and ranking markets in different Polish regions and cities. They were compared with information about the classification of real estate markets on the example of selected property markets in Poland. Selected categories were evaluated to determine whether rating methods for real estate markets, including housing markets, should be developed for different Polish cities and regions. The growth potential of local real estate markets was also analyzed.

An Application of RST as Automated Valuation Methodology to Commercial Properties. A Case in Bari

The lack or unavailability of data poses one of the greatest obstacles hindering the exploration of real estate market information. Due to the small number of observations (cases), there are limited possibilities of using statistical methods, which are generally based on the assumption of a larger number of cases compared to the data describing them. This work provides an application of Rough Set Theory to a small sample of commercial properties as an Automatic Valuation Method. RST has been proposed as an automatic procedure for small sample (d’Amato 2002). It may happen in the application of RST that it is possible to deal with small samples. The rough set theory was applied taking into account the specific nature of information referring to the real property market. This theory is dedicated to examine imprecision, generality and unavailability in the process of data analysis that often occurs on the real estate market. It has been highlighted that one of the problem in AVM application may be the scarcity of data (Downie and Robertson 2007). The model allows the opportunity to reach the results of a single point estimate using if then rules providing a causal non deterministic relationship between price and property characteristics. The model has been applied to a small sample of commercial properties in the city of Bari.

Streamlining of the Process of Decision-Making in Real Estate Management with Incomplete Information

Abstract This paper presents a streamlined sub-system of decision-making in a real estate market with incomplete data. As we currently observe, various entities collect data and use databases, which entails a problem with their quality and completeness. This results from the specifics of the real estate market, particularly from the nature of the available information, access to it and integral uncertainty. In the first part of this paper, we will present substantive guidelines for the development of a procedure for supplementing missing information. Afterwards, in order to verify the feasibility and effectiveness of the procedure, an implementation simulation will be conducted on the selected example. We would like to emphasize that all decisions are made under the conditions of an information gap.