Practice Briefing: Property valuation and market cycles
| Date | 10 July 2024 |
| Pages | 396-405 |
| DOI | https://doi.org/10.1108/JPIF-03-2024-0043 |
| Published date | 10 July 2024 |
| Author | Stephen E. Roulac |
Practice Briefing: Property
valuation and market cycles
Stephen E. Roulac
Roulac Global Advisors, San Francisco, California, USA
Abstract
Purpose –The intent of this practice briefing is to provide clarity on the role of market cycles in influencing
property valuations at specific points in time. Market cycles are important to the valuation function as real
estate cycles have been a critical underlying reason for the financial successes and failures of real estate
investments throughout history.
Design/methodology/approach –This practice briefing is an overview of the role of the valuer/appraiser in
decanting out market information and expectations from market comparables.
Findings –This briefing is a review of property valuation and proffers that connecting market cycles to
valuation will capture a more expansive and inclusive world view that explicitly incorporates consideration of
multiple factors that are reflected in market value.
Research limitations/implications–Important implication of this research is that valuers be aware of how
profoundly market cycles concepts and circumstances influence property values –and implement that
knowledge in property valuation assignments.
Practicalimplications –This briefingconsiders the implicationsof using marketcycles knowledgeas acore
resource for the property valuer. All involved in the property discipline must recognise that market cycles
dramatically influence property values at any one point in time.
Social implications –Societies, cultures, governments, business and places depend upon and have major stake in
competent, responsible, informed decisions about properties and property interest. This research contributes to
superior property practice –and therefore supports the interests of societies, cultures, governments, business and
places.
Originality/value –This briefing provides guidance on how to interpret markets, market cycles and market
information that feed into property pricing and market value.
Keywords Market cycles, Market value, Cyclical, Transformational, Property valuation, Property investment
Paper type General review
Introduction
Market cycles are so very important to the valuation function, for real estate cycles have
been a critical underlying reason for the financial successes and failures of real estate
investments throughout history. Cycles are a major determinant of success or failure
because of their pervasive and dynamic impacts on real estate revenues, cash flows,
returns, risks and investment values over time (Roulac, 1996). Indicative of the importance
of market cycles is that:
More than 50% of real estate research over the 1983–2012 sample period has been devoted to
investigating what determines RE prices/values and what –from an investment perspective –causes
the related cycles and bubbles. (Kӓmpf-Dern et al., 2018)
Consequently, it is fully appropriate that market cycles implications be linked to property
valuation (d’Amato and Coskun, 2022). But that said, the consequences of market
cycles –when uncertainty-induced volatility shoves aside perceived-certainty/stability –
can be vexing in the extreme to those property professionals whose role is to value
properties and property interest (d’Amato and Coskun, 2022). Because of growing
investors’focus on real estate as a distinct asset class that deserves increased portfolio
allocations, investors, and portfolio managers are placing increased emphasis on the
identification, analysis, and decision-making implications of real estate cycles (Pyhrr
et al., 1999).
JPIF
42,4
396
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Journal of Property Investment &
Finance
Vol. 42 No. 4, 2024
pp. 396-405
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-03-2024-0043
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