Direct Capitalization versus Yield Capitalization for Real Estate Property Valuation

Anamaria Ciobanu

The Valuation Journal, 2009, vol. 4, issue 1, 41-55

Abstract: Even though it use a very simple formula, the market value estimation of a real estate property by using direct capitalisation method have to be based on a thorough analysis of factors considered in application of this method. The capitalisation rate observed on real estate market does not necessarily reflect the right level of the premium that should be considered to cover the risk took by the investors. The ratio between net operating income and the transaction price of a similar real estate property can be considered a good reference for the current level of capitalisation rate only when there have been a lot of similar transactions (min. 20-30) and investors are not speculators. From this perspective, this paper will present the important aspects that should be considered for a correct application of direct capitalisation method.

JEL-codes: G31 R15 (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vaj:journl:v:4:y:2009:i:1:p:41-55

Access Statistics for this article

The Valuation Journal is currently edited by Ion Anghel

More articles in The Valuation Journal from The National Association of Authorized Romanian Valuers Contact information at EDIRC.
Bibliographic data for series maintained by Stefan Alexandru ().