Valuations and uncertainty in a post Brexit World

Nick French

ERES from European Real Estate Society (ERES)

Abstract: Valuation is often said to be an art not a science but this relates to the techniques employed to calculate value not to the underlying concept itself. Valuation is the process of estimating price in the market place. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the valuation. The degree of the uncertainties has changed in recent years with a new economic reality where there is a perceived increase in risk and thus uncertaintyIn the UK at the moment the Royal Institution of Chartered Surveyors (RICS) has tightened up the way that uncertainty in the valuation should be conveyed to the user of the valuation.One of the major problems is that Valuation models (in the UK) are based upon comparable information and rely upon single inputs. They are not probability based, yet uncertainty is probability driven. In this paper, the author discusses the issues underlying uncertainty in valuations and suggest a probability-based model (using Crystal Balbpto address the shortcomings of the current model. Although the capitalisation model is analyzed, the paper concentrates upon the application of Crystal Ball to the investment cash flow approach.

Keywords: Market Value; Probability; Property Valuation; Uncertainty (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2018_249

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