Pricing to market: market value – the enigma of misunderstanding
| DOI | https://doi.org/10.1108/JPIF-05-2021-0041 |
| Published date | 28 May 2021 |
| Date | 28 May 2021 |
| Pages | 492-499 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Nick French,Neil Crosby,Chris Thorne |
Practice Briefing
Pricing to market: market value –
the enigma of misunderstanding
Nick French
Real Estate Valuation Theurgy, Frilsham, UK
Neil Crosby
Real Estate and Planning, University of Reading, Reading, UK, and
Chris Thorne
Valuology, Bristol, UK
Abstract
Purpose –Market value is an estimation of price in the market. It is value in exchange. The valuer’s role is to
determine the appropriate approach, the method and use the right model to achieve this aim as best as possible.
However, underpinning all valuations and property analysis are valuation standards and definitions. This
paper looks at the definition of market value and how some market participants may misunderstand or even
misrepresent it. This is particularly true when there is a downturn in the market.
Design/methodology/approach –This practice briefing is an overview of the role of market value as a
definition of price and how it is often misused by stakeholders in the property market.
Findings –This briefing is a review of the valuation definitions clarifying what they mean and what they do
not mean.
Practical implications –The role of the valuer in practice is to use the appropriate definition for the task in
hand. The understanding of those definitions is central to the valuation process.
Originality/value –This provides guidance on how valuation definitions can be presented to the client in
accordance with the International Valuation Standards.
Keywords Market value, Valuation definitions, Worth, Prudent/long-term value, Comparable evidence, IVSC
Paper type General review
The temptation to form premature theories upon insufficient data is the bane of our profession
[Sherlock Holmes] Arthur Conan Doyle (1915) [1]
Introduction
In the other Practice Briefing (Gabrielli and French, 2021) in this issue, we looked at the role of
approaches, methods and models in determining market value for property assets. In this
paper, we discuss the definition of market value itself and how, at certain points in the market,
it can be misinterpreted, misused or misunderstood.
We are not going to diverge into motives for certain stakeholders who may want to
misinterpret or misrepresent the market valuation. Instead, we are going to assume that there
are genuine misunderstandings of valuation concepts, bases and definitions. These potential
misunderstandings have been highlighted recently in a discussion paper by the International
Valuation Standards Council (IVSC) (IVS, 2021). In this paper, the IVSC identifies a number of
issues with market value under the title of “Challenges to Market Value.”
It is interesting to note that questions concerning valuations tend to be raised in the aftermath
of discussions surrounding major downturns in property markets. A consistent theme in the
aftermath of these downturns has been client questioning of valuations underpinning bank
JPIF
39,5
492
This paper forms part of a special section “Practice Briefing”.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 1 May 2021
Revised 3 May 2021
Accepted 3 May 2021
Journal of Property Investment &
Finance
Vol. 39 No. 5, 2021
pp. 492-499
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-05-2021-0041
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