Abstract
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.
Highlights
The real estate market does not differ from other markets which are evaluated by credit rating agencies
The quality of a real estate market rating is a function of its relevance, reliability, usefulness and comparability
Comparability implies the use of uniform rating scales which produce standardized rating scores for the evaluated markets
Summary
“Rating” is an economic term with a variety of meanings. In the discussed context, a rating encompasses the process and the results of evaluation and classification of a given phenomenon. Credit ratings evaluate the performance of various market actors based on a set of standard evaluation criteria They support decision-making in a homogenous environment, minimizing investment risk and increasing the safety of capital investments. Kaklauskas et al (2011) argue that one of the macro-level recommendations for construction and real estate crisis management is reduction of the psychological tension and panic related to coming crisis and new methods must be developed for crisis forecasting and modeling.
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