Real Estate Values Research Articles

City characteristics, land prices and volatility

We develop a model that describes how city characteristics affect the volatility of real estate rents and values. The model includes agglomeration externalities, which amplify the effect of productivity shocks on population growth and rents, as well as city characteristics that constrain population growth. While growth constraints make rents more subject to productivity shocks because of the inelastic supply, they can also suppress the benefits of agglomeration, which has the effect of decreasing the sensitivity of rents to productivity shocks. Our dynamic model exhibits persistent rent growth and rent-to-value ratios that vary across cities and over time. In particular, we show that productivity shocks have a larger initial effect on rents in more constrained cities, but a greater long-term effect in less constrained cities.

All That Glitters is Not Gold: Examining the Negative Impact of Real Estate Value on Companies' Market Competitiveness

AbstractThis paper introduces and investigates the hypothesis that the crowding-out effect surpasses the collateral effect, suggesting that an increase in the value of real estate holdings by companies hinders their competitiveness in the product market within emerging economies. Through our analysis, we elucidate the underlying mechanism, demonstrating that although Chinese listed companies benefit from their real estate holdings in terms of debt financing, these financial resources are predominantly reinvested in real estate projects rather than other productive endeavors. This effect is particularly pronounced when companies face significant financial constraints, operate in highly monopolistic industries, and are situated in regions where local governments heavily rely on land finance and face substantial pressure for GDP growth. By shedding light on the adverse implications of companies' real estate holdings and uncovering the factors contributing to the crowding-out effect, our research underscores the importance of enhanced regulations in the real estate markets of developing nations during the periods of irrational housing booms.

Managing public real estate and the trade-off between supporting user activities and sustainable development: case of the Netherlands police

PurposeCorporate real estate management (CREM) is complex due to an increasing number of real estate (RE) added values and the tensions between them. RE managers are faced with trade-offs: to choose a higher performance for one added value at the cost of another. CREM research mainly deals with trade-offs in a hypothetical sense, without looking at the characteristics of the RE portfolio nor the specific context in which trade-offs are made. The purpose of this paper is to further develop the concept of real estate value (REV) optimisation with regard to tensions between decreasing CO2 emissions and supporting user activities.Design/methodology/approachMixed method study. REV optimisation between user activities and energy efficiency for police stations in the Netherlands built between 2000 and 2020 is analysed. This is complemented by interviews with an RE manager and senior user of police stations and analysis of policy documents.FindingsThe characteristics of the police station portfolio indicate no correlation between user activities and energy efficiency for the case studied. This is complemented by interviews, from which it becomes clear that there was in fact little tension between supporting user activities and energy efficiency. The performances of these two different added values were optimised separately.Originality/valueThis study combines different scales (building and portfolio level) with different types of data: portfolio analysis, document analysis and interviews. This creates a comprehensive image of whether and how the Netherlands police optimised the two RE values.

Unleashing the Power of Artificial Intelligence in Real Estate Valuation: Opportunities and Challenges Ahead

The convergence of real estate valuation and artificial intelligence (AI) represents a transformative frontier in the real estate industry. This paper explores the strategic importance of real estate valuation and the integration of AI technologies, shedding light on their multifaceted contributions to decision-making, value enhancement, and market insights. Through a comprehensive review of literature, theoretical frameworks, and industry insights, the study examines the potential of AI-driven valuation models, predictive analytics, and Explainable AI (XAI) techniques in revolutionizing traditional valuation practices. Key areas of future research, including data integration, ethical considerations, and the development of hybrid AI systems, are identified to advance the field and address emerging challenges. By leveraging AI technologies responsibly, stakeholders can unlock new opportunities for efficiency, accuracy, and transparency in real estate valuation, ultimately shaping a more resilient and sustainable future for the industry.

Unleashing the Power of Artificial Intelligence in Real Estate Valuation: Opportunities and Challenges Ahead

The convergence of real estate valuation and artificial intelligence (AI) represents a transformative frontier in the real estate industry. This paper explores the strategic importance of real estate valuation and the integration of AI technologies, shedding light on their multifaceted contributions to decision-making, value enhancement, and market insights. Through a comprehensive review of literature, theoretical frameworks, and industry insights, the study examines the potential of AI-driven valuation models, predictive analytics, and Explainable AI (XAI) techniques in revolutionizing traditional valuation practices. Key areas of future research, including data integration, ethical considerations, and the development of hybrid AI systems, are identified to advance the field and address emerging challenges. By leveraging AI technologies responsibly, stakeholders can unlock new opportunities for efficiency, accuracy, and transparency in real estate valuation, ultimately shaping a more resilient and sustainable future for the industry.

Assessment of the Impact of Migration Processes on Pricing in the Residential Real Estate Market in the Russian Federation

The dynamics of the housing construction industry can be seen as an indicator of the level of social and economic development of the country. The attractiveness of residential real estate is largely determined by price availability for the population. However, it is important to consider demographic factors. Therefore, the study assessed the effects of migration, along with parameters such as salary dynamics, mortgage lending and construction volumes of the Russian Federation. The purpose of the study is to justify the importance of migration dynamics to change the value of residential real estate. The subject of study is the existence of dependence of migration processes and pricing dynamics taking into account additional parameters of the country’s economy. The object of the study is pricing in the residential real estate market in Russia. Research methods are vector autoregression models (standard and Bayesian ones). Monthly data of official statistics for Russia for 2011–2021 as well as scientific articles and published studies of employees of the Bank of Russia were used as the information base. The initial hypothesis of the study is that the factor of migration significantly affects the final indicator of the cost of housing. The analysis made it possible to determine the importance of factors that have a sustainable long-term impact on the dynamics of prices in the residential real estate market.

Tenant Business Characteristics and Commercial Real Estate Portfolio Fundamental Performance

This paper extends the literature on tenant characteristics and concentration on REIT performance. It fills in the knowledge gap of understanding how tenant business characteristics influence risk-return performance of directly held commercial real estate portfolios. Unlike the literature, it avoids compounding the peripheral information of financial leverage and capital market volatility into analyses for publicly traded real estate portfolios. We build a unique database of direct real estate by manually collecting fair value and rental value of investment real estate from annual reports of publicly traded real estate companies or trusts in New Zealand. Sharpe ratio and its significance on Z-statistic are analyzed and compared across twenty-four hypothetical portfolios sorted by geographic region, real estate sector and tenant business characteristic, respectively. It is found that certain tenant business industry can provide significantly superior performance during the entire sample period over other hypothetical portfolios. Specific tenant business industry and real estate sector show strong resilience to the 2007 global financial crisis. Tenant headquarter location signals commercial real estate risk-adjusted return performance. Our findings can facilitate researchers to extend their exploration of publicly traded real estate portfolios and help the understanding of market efficiency for commercial real estate and its related markets.

The implementation of long-term prudent valuation models across the UK and Mainland Europe for financial regulation purposes

ABSTRACT The Basel 3 guidance on bank regulation includes a new definition of real estate valuation which differs from existing bases. Prudently conservative valuation or prudent value includes four criteria which include the exclusion of ‘expectations of price increases’ and it must be ‘adjusted to take into account the potential for the current market price to be significantly above the value that would be sustainable over the life of the loan’. ‘National supervisors should provide guidance’ and ‘If a market value can be determined, the valuation should not be higher than the market value’. Prudent value has synergies with existing post Global Financial Crisis (GFC) debates concerning long-term valuations for commercial real estate bank loan origination and monitoring purposes. This paper outlines the concepts of long-term and prudent values in more detail, reviews the literature on long-term valuation and develops a framework for prudent value. It also puts that literature into a wider perspective on the analysis of market cycles and portfolio disaggregation within performance measurement, and suggests ways in which the property industry could implement the current Basel 3 prudent value proposals.

Effect of Compliance with Valuation Standards and Awareness on Property Value Certification among Estate Surveying Firms in Abuja, Nigeria

The quest for reliability and consistency in real estate valuations services prompted the use of valuation standards. The extent of compliance with this valuations standards by property appraisers is a matter due for worthy consideration. This study aims to examine the effect awareness of valuation standards and compliance has on property value certification. The target population comprises registered Estate Surveying firms who are in private practice in Abuja, Nigeria. The sampling frame is 171 registered firm. The sample size of 118 was adopted. The reliability of the study data was measured using Cronbach’s Alpha test which showed that valuers’ awareness and compliance to valuation standards, and property value certification variables with 5, 3, and 7 measuring constructs respectively, were reliable with value above 0.70. The findings of the study show that awareness has a mean score of 3.4392 which is high with the 5-point likert scale, likewise, appraisers’ level of compliance is high, with a mean score of 3.7017, also property value certification showed a mean value of 3.9766. In examining the effect of valuation awareness and compliance on Property value certification multiple regression analysis was employed and the variables explained 57.4% of the model; which implies that awareness and compliance were responsible for 57.4% of the variation in property value certification. The effect of awareness and compliance on the certification of property values; the ANOVA analysis showed that awareness and compliance has a significant positive effect on property value certification, while awareness to valuation standards has a 26.9% effect, compliance with standards has a higher effect of 57.6%. Therefore the study concludes that while awareness and compliance both have significant positive effect on property value certification, compliance to valuation standards has a greater effect on real estate property value certification.

About the Permissible Errors of Appraisers in Determining the Value of Real Estate

The article discusses the most used types of real estate values, the features of their definition and relationship, calculation methodologies. The market value in the article is considered as the main reference point when determining the cadastral value or when making investment decisions. Based on the examination of reports on the contesting of cadastral value, a conclusion is made about the mass use of the comparative approach in deriving the equilibrium value of real estate. Particular attention is paid to the errors that appraisers make in their work when determining the market value of real estate and which in the future significantly affect its results.

Real Estate Valuations with Small Dataset: A Novel Method Based on the Maximum Entropy Principle and Lagrange Multipliers

Accuracy in property valuations is a fundamental element in the real estate market for making informed decisions and developing effective investment strategies. The complex dynamics of real estate markets, coupled with the high differentiation of properties, scarcity, and opaqueness of real estate data, underscore the importance of adopting advanced approaches to obtain accurate valuations, especially with small property samples. The objective of this study is to explore the applicability of the Maximum Entropy Principle to real estate valuations with the support of Lagrange multipliers, emphasizing how this methodology can significantly enhance valuation precision, particularly with a small real estate sample. The excellent results obtained suggest that the Maximum Entropy Principle with Lagrange multipliers can be successfully employed for real estate valuations. In the case study, the average prediction error for sales prices ranged from 5.12% to 6.91%, indicating a very high potential for its application in real estate valuations. Compared to other established methodologies, the Maximum Entropy Principle with Lagrange multipliers aims to be a valid alternative with superior advantages.

Factors Contributing to a Land Value Information System to Become a Solution for the Shortage of Property Transaction Evidence in Sri Lanka: Property Valuers’ Perception

In developing markets, obtaining comparable evidence for real estate valuations is often challenging. Land Value Information Systems that aim to gather, store, handle, retrieve, and perform land-related data for lawful, organizational, and institutional decision-making processes, have been used in developed countries to address this issue. However, Sri Lanka lacks a comprehensive land value information system. Thus, this study aimed to examine the factors that contribute land value information systems to become a potential solution in addressing lack of property transaction data, focusing on the perception of property valuers in Sri Lanka. A structured questionnaire, unstructured interviews and discussions were used with 30 professional real estate valuers in both qualitative and quantitative methods, revealing a positive attitude towards adopting the system. The advantages of such systems were aligned with time saving, accessibility to up-to-date data, convenience, etc., while concerns included disrupting the valuation industry’s monopoly and information security challenges. The contributing factors were identified under three main categories, technological factors, organizational factors and people factors. Study findings revealed that technological factors were ranked high as most impactful for the successfulness of a land value information system. While technological and organisational factors were deemed achievable during implementation, the study suggests additional efforts, such as establishing a help desk, conducting training programmes to address people-related factors.

The Application of Fair Value Measurement in Investment Real Estate

Investment real estate has the characteristics of large investment scale and slow monetization speed. Many enterprises usually adopt a cost measurement model. With the establishment of China's market economy system, the difference between the construction price and sale price of investment real estate under the cost measurement model is relatively large, far greater than the fair value and sale price of investment real estate, which cannot adapt to the development of modern real estate industry. The use of fair value model has improved the timeliness and quality of accounting information, and objectively reflects the market value of real estate enterprises. This article focuses on fair value measurement and analyzes the advantages and disadvantages of this model in the application of investment real estate. At the same time, corresponding suggestions are proposed for the problems that arise during the use process.

Climate risk and commercial mortgage delinquency

AbstractNatural disasters such as hurricanes, floods, heatwaves, and wildfires are projected to become more prevalent in the foreseeable future. Climate risk is, therefore, increasingly recognized as an important factor by policy makers, the investment community, and financial markets. Due to the immobility of assets, the commercial real estate industry is especially vulnerable to climate risk, and there is an increasing interest to understand the impact of climate risk on the value of commercial real estate. For commercial real estate lenders, changes in collateral value are only of partial importance. The ability of borrowers to meet their payment obligations is equally, if not more important. By combining historical data on two major climate‐related disasters—Hurricanes Harvey and Sandy—with longitudinal information on commercial mortgage performance, this paper identifies the impact of climate risks on mortgage delinquency rates for commercial real estate mortgages. The results show that both Harvey and Sandy led to elevated levels of commercial mortgage delinquency, with significant heterogeneity based on the extent of damage in the Census block group. Information provided through FEMA 100‐year floodplain maps partially mitigates the effects, an indication that lenders incorporate flood risk information in the underwriting process. An analysis of potential mechanisms indicates a decrease in property income during the 2‐year period following the event for Hurricane Harvey, but no evidence of income effects for Sandy.

Fresh air in the city: the impact of air pollution on the pricing of real estate.

This study investigates the impact of ambient air pollution on housing prices in Warsaw, Poland, by examining spatial dependencies. The high concentration of particulate matter (PM10, PM2.5 and PM1) is expected to reduce real estate values. Using a hedonic model with approximately 15,000 observations and a spatial error model, we did not find evidence of this impact. Standard and premium housing submarkets differ in price determinants, but both are insensitive to environmental issues. This could be explained by the lack of comprehensive intra-urban historical information on air pollution, which limits investors' rationality and their ability to properly value real estate based on environmental issues. Additionally, measurement and aggregation issues, along with low pollution variability within the city, may contribute to the insignificance of this information in real estate sales prices. Our empirical research confirms a strong link between air pollution and weather conditions within the city, where low temperatures and low-speed southern winds worsen contamination levels, while high temperatures and westerly winds improve air quality. Furthermore, we find that incorporating pollution data using PM yearly mean concentration works better in modelling than the PCA-reduced air pollution index.

Application of methods based on ensembles and deep neural networks to estimating the cost of commercial real estate

The paper considers the possibility of using ensemble machine learning models and artificial neural networks to solve the problem of assessing the value of commercial real estate. There are some models such as the gradient boosting model and the TabNet model have been trained. The main goal of these models is predict the value of commercial real estate without creating dependencies between data by the analyst. The proposed solutions are considered from the point of view of the banking sector. The best predictive model is the gradient boosting model implemented using the LightGBM library. The advantages of this model are associated with its ability to "resist" the presence of outliers in the data and a low propensity for retraining.

Life cycle of the facility and its cost at the construction stage

The article presents a study of the main aspects of managing the value of real estate in the process of implementing investment and construction activities. The study was conducted in the context of the concept of the "life cycle of a capital construction facility" with the decomposition of its stages into regulatory, financial, economic and engineering. The life cycle of an object creation project is defined as a subsystem in the structure of the overall life cycle of an object, combining a set of stages implemented in the process of creating an object. The author has formulated the main factors affecting the value of real estate during the construction at various stages of the project life cycle. The paper defines a mechanism for managing the cost of an object as interrelated stages of the project life cycle, price-forming factors and methodological support for the process of its economic assessment with the definition of types of value, taking into account the objectives of determining the value of the object in the process of its creation. The use of the tools and methods presented by the author is designed to ensure an increase in the efficiency of managerial decision-making during the construction.

Exploring the Issues and Scenarios among Malaysia’s Real Estate Valuers Community Related to Smart City Concepts

The rise of smart city concept is fundamental because it is more integrated in the fast-growing urbanisation nowadays and the primary objective is to solve the social problems that are associated with the urban cities. Though the outcomes of these programs may vary based on the level of participation of the real estate valuers community and its acceptance of them. In the light of it, the aim for this study would be to show the problems and scenarios personally proven as obstacles for real estate valuers while the acceptance of smart city concept is in Malaysia. This will lead to the community being able to familiarize themselves with the smart city technologies and the process of valuation. This study has been carried out throughout the entire process of development of smart city ecosystem. The purpose of this study is to be able to distinguish the issues and scenarios among real estate valuers community related to smart city concepts. Thus, this study could help us understand on how to stimulate more involvement and participation of real estate valuers community in the urban areas that are under the category of smart city. It can be used in educating political leaders on inclusive policies, involving citizens in designing and operating technologies that people want and let the communities play a role in planning how they will design the city. Conclusively, thi study intended to lay the foundation for the sustainability and equality of smart cities, which are vital aspects of national development.

Retraction Note: Analyzing the economic value of BIM technology in urban real estate adjudication through Meta

This article has been retracted because it substantially reflects the content and analysis of the following original article, without reference to it: Jafary, P., Shojaei, D., Rajabifard, A., Ngo, T., 2024. BIM and real estate valuation: challenges, potentials and lessons for future directions. Engineering, Construction and Architectural Management 31, 1642-1677. https://doi.org/10.1108/ECAM-07-2022-0642 Retraction approved by the Editor and the Publisher on October 10, 2024.

ОСОБЛИВОСТІ ОЦІНКИ НЕРУХОМОСТІ: ЗАКОРДОННИЙ ДОСВІД

The purpose of the article is to study the features of real estate valuation abroad. The article analyzes the experience of real estate valuation in foreign countries. It was found that the Center of Lithuanian Registers operates in Lithuania, which includes the register of immovable property and cadastre, the register of legal entities, the register of addresses and registers of residents. In Georgia, all registers are united in the National Public Register Agency. In Sweden, a general assessment is carried out every six years with the purpose of adjustments if necessary, a simplified general assessment is carried out three years after the general assessment, a special assessment is carried out annually to assess newly built properties. In Slovenia, an infrastructure has been created for more efficient management of land resources and mass valuation of real estate, and a register of sales prices is in place to ensure the collection of information about deals on the real estate market. In Poland, mass assessment is a set of procedures for determining the cadastral value of property for tax purposes. In Switzerland, the cadastral accounting of real estate is carried out at the international and cantonal levels. In France, residential buildings are taxed separately from industrial and commercial objects. The annual rental value is used to estimate the value of commercial buildings. In Australia, Denmark, Sweden and Indonesia, the method of determining the estimated value is based on the comparison of sales prices, in Switzerland, Canada and the Netherlands – on the capitalization of income from the permanent use of real estate. Ukrainian legislation on real estate valuation is analyzed. Its features during the war period are highlighted. It is indicated that access to the State Register of Property Rights to immovable property has been restored, and separate norms and rules have been established regarding registration actions. It has been found that in Ukraine such methodical approaches to assessment as income (profitable), expenditure (property), comparative (market) have been established. Further research should be aimed at revealing the role of economic analysis in the land management system after the end of martial law.