Purpose – A central consideration in real estate is the analysis of those factors that impact upon value, in particular how value is created in real estate development and investment deals. The converse of understanding how real estate value may be destroyed is equally important. The paper seeks to argue that a better understanding of these processes would allow more informed and successful decisions to be made in structuring investments and evaluating performance.Design/methodology/approach – An innovative web‐based survey tool was employed. The paper analyses expert opinion based on a sample of 97 real estate professionals from North America and Europe. Those issues that can impact on the creation and destruction of value in real estate development and investment projects and their relative magnitude of impact are assessed.Findings – There is no apparent distinction between those factors that create value and those that destroy value, though there are variations in the magnitude of impact. Idea/concept ...

Real estate value: creation and destruction

In recent years there has been a growing debate on price, value and worth, particularly in the UK, but increasingly taking on a European perspective as a result of the Single European Act and subsequent Maastricht Treaty. European integration facilitates cross‐border investment and the globalization of business activities. Consequently, there is increasing pressure on valuers to work towards the development of common investment valuation standards within Europe. Furthermore, there is a need to appraise the investment worth of properties, as well as understand local pricing methods, together with greater transparency of investment valuation methodologies and practices. This paper discusses the theoretical arguments surrounding the valuation standards prevalent in the UK and looks towards the potential for uniformly accepted valuation standards across European Union countries.

Concepts of price, value and worth in the United Kingdom – Towards a European perspective

A weakness in most discussions about definitions of market value is that no explicit criteria for judging whether a definition is good or bad are presented. In this article three criteria are analysed: the definition should have a clear meaning, the definition should be such that it is possible to know, at least approximately, what the market value is, and finally that the definition should lead to a concept that is relevant for actors on the market. These three criteria are then used to analyse three questions: “Should the definition include a reference to prudent and knowledgeable actors?”, “Should the definition refer to willing buyers and sellers?” and finally, “How shall we interpret the concept of expected or probable price?” The answer to the first and second question is no. The answer to the third question is that a frequency interpretation of probability should be rejected in valuation contexts, in favour of an interpretation where probability is identified with a rationally justified degree of confidence.

The definition of market value: Criteria for judging proposed definitions and an analysis of three controversial components

This paper presents the initial results of a major research project concerning real estate value. A central consideration is the analysis of those factors that impact upon value, in particular how value is created in real estate development ventures and investment deals. The converse of how real estate value may be destroyed forms a key component of the analysis. It is argued that a better understanding of these processes would allow more informed and successful decisions to be made in structuring investments and evaluating performance. The information underpinning this study is based on a survey of real estate professionals aimed at increasing knowledge on how value is created and destroyed. The study, which is being conducted at a global level, initially compares findings and perceptions from the UK market with those for the US using a common survey tool. Conclusions focus upon factors influencing real estate value, consequences arising from changes in value and implications for policy mechanisms notably in an urban regeneration context.

Real Estate Value: Creation and Destruction?

Value‐Based Approaches to Property Taxation

Considers the problems which have arisen in recent years from the many definitions of ′market value′ which occur in various parts of the world. Suggests there is a need for a common language and the avoidance of terms which tend to confuse the issues involved rather than clarify them. Deals with the concept of forced sale and makes reference to the vital role of the International Asset Valuation Standards Committee.

Graeme J. Horsley

Papers

Market Value: The Sacred Cow