Real Property Valuation Research Articles

Valuation of State-Owned Enterprises in the Process of Privatisation in Ethiopia: Procedures and Methods

Real property valuation is a vital component in the privatization of state-owned enterprises (SOEs). In Ethiopia, real property valuation is a difficult task as there is a lack of skilled manpower in the field, no adequate real estate market, and legal gaps in valuation. In addition literatures are scant about how real property valuation is done. Therefore, this study examines real property valuation procedures and challenges in the process of privatization of state-owned enterprises (SOEs) in Ethiopia. To achieve the objective of the study, qualitative research approach is applied. The target populations of the study were appraisers who participated in the valuation of SOEs. A purposive sampling technique was used to select respondents. Primary data were collected from appraisers using key informant interview (KII). Document review from different secondary sources was employed to triangulate the KIIs. The data were analyzed using thematic grouping and narration. The study found that for profitable enterprises Depreciated Replacement Cost (DRC) and Discounted Cash Flow (DCF) methods have been applied while for loss-making enterprises the DRC method has been used. These methods are selected based on the preceding three years of data. Moreover, these valuation methods are not applied in a proper way and the basis of selecting these methods are unjustifiable. The valuation result of SOEs, do not reported in a standard valuation reports formats. Lack of skilled manpower, inappropriate use of the valuation approaches, inappropriate base for selecting techniques of valuation, and organizational inefficiency are the key problems faced during valuation. To improve the situation market principles should be applied in the valuation of SOEs for privatization purposes in Ethiopia. These can be achieved by introducing strong institutions responsible for valuation regulations at the central level.

Features of determining the real property valuation using the alternative approach of matrix pseudo-inversion

The purpose of the work is the application of using the method of matrix pseudo-inversion to determine the market value of real estate objects using the mathematical apparatus of the method of comparing sales of similar real estate objects. Using modern mathematical methods to calculate the value allows us to overcome the influence of the appraiser's subjectivity. One of the main goals of research and analysis of adjustment factors is the analysis of the real estate market, the structure and distribution of costs for creating a system of real estate improvements and components of the settlement’s infrastructure. For the first time, the method of matrix pseudo-inversion was applied to determine the market value of real estate objects for the case when it is impossible to obtain the inverse matrix in the classical way. Conducted studies using the pseudo-inverse matrix theory also make it possible to determine the coefficients to the value of the object of evaluation according to the most influential price-forming factors. The result obtained by this method can serve as a benchmark when the value is determined by the classical valuation methods.

Analysis on Effect of COVID -19 on Property Valuation in Real Estate Market

Abstract: The valuation of real estate is a central tenet for all businesses. Land and property are factors of production and, as with any other asset, the value of the land flows from the use to which it is put, and that in turn is dependent upon the demand (and supply) for the product that is produced. Valuation, in its simplest form, is the determination of the amount for which the property will transact on a particular date. However, there is a wide range of purposes for which valuations are required. These range from valuations for purchase and sale, transfer, tax assessment, expropriation, inheritance or estate settlement, investment and financing. The objective of the paper is to provide a brief overview of the methods used in real estate valuation. Valuation methods can be grouped as traditional and advanced. The traditional methods are regression models, etc. MRA has been implemented by many researchers to study valuation of real property cite that MRA is possible for coefficient estimates and factor weightings using a large number of actual sale cases. Keywords: Real property, property valuation, multiple regression analysis, SWOT Analysis

Valuation inaccuracy, approaches, basis and procedures for judgment execution in Ethiopia

PurposeThe causes of valuation inaccuracy, the approaches, basis and procedures used for value estimation were not profoundly identified in Ethiopia. Particularly, the causes of property valuation inaccuracy for court decisions have not been assiduously studied by scholars. Hence, the ultimate goal of this study aims to identify the determinant variables of valuation inaccuracy, the approaches, basis and procedures used for court execution purposes.Design/methodology/approachThis study employed both qualitative and quantitative approaches. The target populations of the study were the courts at the federal and regional levels. A purposive sampling technique was employed to undertake this study. The survey data was analyzed using the Relative Importance Index (RII).FindingsThe finding of this research revealed that courts have not outshined and uniform valuation manuals and guidelines that clearly state the approaches, procedures and bases of valuation. As a consequence, courts execute based on the opinion of value determined by other institutions. The insignificant numbers of independent valuation institution with the lack of uniform standards in the country prejudice the implementation of the decision of the court and faced injustice. The finding also reveals as there are several causative variables for real property valuation inaccuracy.Practical implicationsTo alleviate the problem, the government should strengthen the valuation sector by creating an independent institution for advancing valuation regulation and policymaking.Originality/valueThis study was the first of all and could be a pointer for different government and non-government bodies regarding the limitations of valuation for judgment execution purposes.

Real Property Value Prediction Capability Using Fuzzy Logic and ANFIS

Real property valuation is important as it gives an overall idea of the cost involved in the property beforehand. It enables to create transparency in the transaction of the real estate market. Prediction of real property value is beneficial and has multifold advantages. Traditionally property valuation is executed through the use of sales comparison method, rental method, profit method to name a few. When there is a nonlinear relationship between parameters affecting the price of the property and output, then it becomes difficult to predict the value by traditional methods. Therefore, to deal with the non-linearity of the dataset, modern techniques are resorted to. The use of different Artificial Intelligence (AI) techniques such as Artificial Neural Networks (ANN), genetic algorithm, fuzzy logic, Adaptive Neuro-Fuzzy Inference System (ANFIS) is increasing in the real property sector. In the present study, the prediction model is prepared for selected geographical sectors of Pune city, in India by using the Fuzzy Logic and ANFIS. It attempts to provide a comparison of their output based on the accuracy of the developed model and also based on the characteristics of the available dataset. The study endeavors to develop a value prediction capability with the use of soft computing.

Estimation of Residential Property Market Price: Comparison of Artificial Neural Networks and Hedonic Pricing Model

The correct real estate property price estimation is significant not only in the real estate market but also in the banking sector for collateral loans and the insurance sector for property insurance. The paper focuses on both traditional and advanced methods for real estate property valuation. Attention is paid to the analysis of the accuracy of valuation models. From traditional methods, a regression model is used for residential property price estimation, which represents the hedonic approach. Modern advanced valuation methods are represented by the artificial neural network, which is one of the soft computing techniques. The results of both methods in residential property market price estimation are compared. The analysis is performed using data on residential properties sold on the real estate market in the city of Nitra in the Slovak Republic. To estimate the residential property prices, artificial neural networks trained with the Levenberg-Marquart learning algorithm, the Bayesian Regularization learning algorithm, and the Scaled Conjugate Gradient learning algorithm, and the regression pricing model are used. Among the constructed neural networks, the best results are achieved with networks trained with the Regularization learning algorithm with two hidden layers. Its performance is compared with the performance of the regression pricing model, and it can state that artificial neural networks can considerably improve prediction accuracy in the estimation of residential property market price. Doi: 10.28991/esj-2020-01250 Full Text: PDF

Today's Market Needs Modernized Property Appraisers

Abstract 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.

Hedonic Pricing Model for Real Property Valuation via GIS - A Review

Hedonic pricing models in real property valuation have been frequently applied in many research studies and projects since it was introduced by Rosen in 1974. The development of Geographic Information Systems (GIS) in the recent decades has gradually supports the usage of hedonic model in the spatial data pricing model studies. Beside the basic advantages of GIS to position properties in terms of their geographic coordinates, it has the capabilities of dealing with reasonable amount of data, and wide choices of analysis that make it powerful tool to facilitate the building and implementation of the hedonic models within its framework. Many studies have employed GIS in real property valuation in their present work and for the future prediction. This paper reviews the works of literature on the GIS applications in the real property valuation employing the hedonic pricing models.

Simulative Verification of the Possibility of using Multiple Regression Models for Real Estate Appraisal

Abstract The possibility of using multiple regression models in real estate valuation is the subject of disputes, both in theory and in practice. Econometric modelling is a difficult process, since a number of issues of substantive and numerical nature occur during that process. Modern technologies enable quick and easy model estimation with the use of virtually any quality of data. Naturally, it provokes property appraisers to use such models in the practice of real property valuation, particularly in mass appraisal, frequently without taking those issues into account. Consequently, the models obtained and applied in practice turn out to be of poor quality and, objectively speaking, should not serve as the basis for determining real estate value. The specificity of the real estate market and of the real properties themselves as objects traded in that market additionally exert a negative impact on the quality of the obtained models. In this article, the authors present the results of research which involved a simulation of various types of disturbances of a model artificially developed database of real estate prices and attributes as well as their impact on the quality of estimated models. The research will make it possible to answer the question of the degree and type of disturbances that are permissible in the functioning of a real estate market if the estimated models are to still satisfy the qualitative requirements defined for them, and thereby produce accurate valuation results. A model database will be disturbed by the deviation of prices from model prices and by reducing its size. Radom generators were used to obtain database disturbances.

LOSSES AS THE RESULT OF RESTRICTIONS ON USE OF LAND. TRANSFORMATION IN THE MONEY

Due to the lack of a proper conceptual and categorical apparatus, it is rather difficult to determine under what circumstances the owner / user of the land plot has the right to reparation and what is the actual damage. That is why, for a clear understanding of the tasks of land management expertise and the feasibility of a full, substantiated and objective study to calculate the amount of damage caused to land owners and land users, we consider it necessary to go further into the aspect of losses, for example, of damages caused by the restrictions on land use , and the order of their calculation. Using the example of restrictions on the use of land, the author came to the conclusion that grounds for imposing restrictions on the use of land, according to article 111 of the Land Code of Ukraine, do not cause a loss to the land owner/user in each case. We believe that the loss caused by restrictions on the use of land, are the lost, additionally spent or under-received property benefits (monetary assets), caused by the violation of the rights of the owner / user of a land plot after establishing the restrictions of a land use on a land plot. In itself, the restriction in the use of land does not give rise to the right to compensation for damages, however, it can adversely affect the property of the owner (worsen it, destroy it), and therefore occurs a damage. It was also determined that the fact of causing harm to the owner or user of the land plot, that is, the onset of negative consequences for him, is not always associated with unlawful behavior. And the right to compensation for damages the owner / user of the land will have, regardless of the fault of the subject who caused him damage. Legal relations arising in the land sphere allow special conditions for the compensation of losses to land owners / land users that arise: – under the circumstances of the occurrence of harm through the perfect wrongful act; – under the circumstances of the occurrence of harm through the perfect lawful act; – under the circumstances of the occurrence of damage caused by the violation of contractual obligations. Referring to the procedure for calculating the amount of damage, the author concludes that this is carried out in a general manner, in accordance with special regulations – National Standard №. 1 «General Basis for Assessing Property and Property Rights», approved by Resolution of the Cabinet of Ministers of Ukraine No. 1440 of 10.06.2003 and National Standard № 2 «Real Property Valuation», approved by the Resolution of the Cabinet of Ministers of Ukraine of 28.10.2004 №. 1442. Key words: forensic examination on questions of the use of land; land plot; losses inflicted to the land owners and land users; the restriction in the use of land; calculation of losses.

Expropriation of Real Property in Kigali City: Scoping the Patterns of Spatial Justice

The key question in this article is the extent to which current real property expropriation practices in Kigali city promote spatial justice. Current studies focus on the ambiguous manner in which real property valuation had been regulated by the expropriation law of 2007, leading to unfair compensation and various conflicts between expropriating agencies and expropriated people. Following its amendment in 2015, the law currently provides clearer procedures for valuation and fair compensation, based on the market prices. Using indicators that measure spatial justice, this study evaluates if the current expropriation processes result in spatial justice, consisting of procedural, recognitional and redistributive justice. These indicators are described using three dimensions of spatial justice: rules, processes and outcomes. Data were collected through household surveys, focus group discussions, stakeholders’ interviews and observations in four urban neighbourhoods where expropriation has taken place in Kigali city. Interpretative and statistical analysis of the data reveals some patterns of procedural, recognitional and redistributive justice in the rules dimension. There is no indication of any pattern for other dimensions. This relates to limited budgets of expropriating agencies which insufficiently follow the law. The consequence is the decreased redistributive justice in the compensation and the increase in the displacement effect of expropriation. Although, counter-valuations result in fair compensation, there is limited evidence for good trends of spatial justice in the whole process of expropriation.

Ownership and Perpetual Usufruct in the Valuation of Undeveloped Real Property on the Example of Parallel Markets

Abstract The paper presents an analysis of the trade in undeveloped real property in two cases: the ownership title and perpetual usufruct. The aim was to find the relation between the values of these rights in parallel markets, which allows to evaluate a better type of right to the property with a worse one. Such a solution is justified when the data is lacking in the local market. The solution is also frequently encountered in the practice of a property appraiser (Dobek, Suchoń, Wajszczuk, Wielicki, 2009). In the empirical study, the information used concerned the transactions concluded between the years of 2013‒2015 in two surveying precincts in Bydgoszcz district. In both cases, two different rights to property were traded, however, their percentage share in the total number of transactions was significantly different. It enabled to determine a correction factor for both types of rights to property. The analyses were preceded by the examination of concluded agreements, in particular, the characteristics of the traded real properties.

Valuation of Residential Premises for the Purposes of Securing the Receivables of the Creditor in Poland

The study presents an analysis of the theoretical and practical issues connected with securing the receivables of creditors, in particular the principles connected with the appraisal of real property value used for the purposes of granting loans in Poland. The scope of research included the basic elements of the functioning and organisation of the Polish banking system, legal forms of securing debt receivables and the principles of real property valuation for universal and mortgage banks. Additionally, the authors have conducted an analysis of the number and amount of loans granted in Poland in the years 2009 – 2016

Calculation and spatial distribution of capitalization rates in the selected segment of reality properties

The process of real property valuation by usage of income approaches is significantly affected by capitalization rate. This article deals with problematic of the capitalization rate determination in the real estate segment of apartments in the Ostrava city. It primarily aims to calculate the level of gross capitalization rate according to different urban localities of Ostrava, for various sizes of apartments, as well depending on the type of apartment ownership. The analysis of the real estate market is an important part of the research. It is focused on the offer of apartments from the perspective of market apartments for sale and also of market apartments for rent. The analyzed and calculated spatial values distributions are consequently processed into cartographic outputs.

Calculation and Spatial Distribution of Capitalization Rates in the Selected Segment of Reality Properties

Abstract The process of real property valuation by usage of income approaches is significantly affected by capitalization rate. This article deals with problematic of the capitalization rate determination in the real estate segment of apartments in the Ostrava city. It primarily aims to calculate the level of gross capitalization rate according to different urban localities of Ostrava, for various sizes of apartments, as well depending on the type of apartment ownership. The analysis of the real estate market is an important part of the research. It is focused on the offer of apartments from the perspective of market apartments for sale and also of market apartments for rent. The analyzed and calculated spatial values distributions are consequently processed into cartographic outputs.

Flood Risk as a Price-setting Factor in the Market Value of Real Property

Abstract Currently, flood risk can be considered as the most serious threat, mainly in areas and countries where hardly any other natural risks occur. In relation to the field of valuation and insurance, flood risk represents a significant factor entering the new valuation procedures as well as binding regulations for real property valuation. The main objective of the research was to determine whether flood risk could be considered as a price-setting factor in market price of a real estate. If so, then it would be possible to start considering it in real estate valuation methods. Statistical methods of multiple linear regression model and statistical hypothesis testing, particularly statistical signification of regression parameter representing flood risk were employed in the research. The research was performed on the housing segment of the Czech real estate market. The paper presents an estimated model with a modified set of parameters that can be used to determine the market price of a house and also determine the degree of influence factor the flood risk may have on the final market price.

El plano de una ciudad desigual. La distribución espacial de la riqueza en la ciudad de Buenos Aires en 1839

This article studies the spatial distribution of assets such as real state and business capital in the city of Buenos Aires in the mid-nineteenth century. Tax records constitute the principal documentary source; it provides an accurate snapshot of urban wealth and their owners. Mapping and spatial analysis tools are useful to observe the patterns of distribution. We combine the variables of wealth (valuation and access of real property and commercial circuits) with other social and demographic variables, in order to differentiate economic areas in the city. Among the results of this research, we emphasize the existence of a classic pattern of distribution in which the rich center and the poorest suburban periphery feature a contrast. But we also perceive the growing importance of the suburbs as places of accumulation of wealth and opportunities of access to urban land for low and middle social sectors.

The Determination Of Optimal Reservation Price Setting For Homeowners

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: widow-orphan;"><span style="font-family: Times New Roman; font-size: x-small;">This paper considers the problem of determining the optimal reservation price for a seller of real estate.<span style="mso-spacerun: yes;">  </span>Although there exists much literature regarding the appraisal of real estate and property valuation, little research has focused on the process through which the seller may set a minimum price that he is willing to accept when bids are received over time.<span style="mso-spacerun: yes;">  </span>An exploratory and preliminary model is developed from which an optimal reservation price is determined as a function of pertinent cash flows and an ex-ante declared cumulative distribution of bids.<span style="mso-spacerun: yes;">  </span>Bids arrive according to a Poisson process and are a function of the listing price.<span style="mso-spacerun: yes;">  </span>A numerical example is provided to illustrate the results.</span></p>

Is property assessment really essential for taxation? Evaluating the performance of an ‘Alternative Assessment’ method

Many countries evade the formal valuation of real property for taxation purposes by using qualitative and spatial criteria in order to pursue an equitable distribution of burden. This paper evaluates the performance of a prototypical setup as such, by analyzing the relationship between property value, household income and the actual tax paid, in the exact framework of which the qualitative criteria are set to determine tax assessment. Drawing on detailed data from the Israeli Household Expenditure Surveys 1997–2005, the strong correlation between the three variables is evident. Yet, the limited differences in rates, compared with large variation in property value, make it regressive. Policy implications are relevant for many other countries using non-ad valorem taxation.

The restitution of the dowry: the ambiguous game of the valuation of real and personal property (Venice 16th-18th centuries)

The restitution of the dowry: the ambiguous game of the valuation of real and personal property (Venice 16th-18th centuries)