The assessment of worth: the need for standards
| Date | 01 February 2000 |
| DOI | https://doi.org/10.1108/14635780010316654 |
| Pages | 52-65 |
| Published date | 01 February 2000 |
| Author | David Mackmin,Richard Emary |
| Subject Matter | Property management & built environment |
JPIF
18,1
52
Journal of Property Investment &
Finance, Vol. 18 No. 1, 2000,
pp. 52-65. #MCB University Press,
1463-578X
Received November 1996
Revised January 1999
ACADEMIC PAPERS
The assessment of worth:
the need for standards
David Mackmin
School of Urban and Regional Studies, Sheffield Hallam University,
Sheffield, UK and
Richard Emary
Department of Property, University of Auckland, Auckland,
New Zealand
Keywords DCF, Standards, Investment, Property
Abstract Buy/sell decisions in the property market, as in most markets, are based on individual
or professional opinions that the exchange price is below or above the individual's opinion of
worth. This article considers the RICS definition of worth and explores other definitions and
meanings in the property investment market. It reviews the current provision for DCF in
standards or information papers and concludes that, while the International Valuation Standard
Committee's definition of market value is now recognised on a world basis, confusion over the
meaning of ``worth'' and the use of DCF will continue if similar international standards are not
agreed.
Introduction
For so it fall out/that what we have we prize not to the worth/whiles we enjoy it, but being
lacked and lost,/why then we rack the value (Shakespeare).
Mallinson (RICS, 1994) identified the growing client requirements for advice
that went beyond an opinion of open market value. One of the areas noted by
the RICS (1997a) is the assessment or calculation of worth. This article explores
the potential for confusion over the meaning and definition of worth, the
approach to the calculation of worth in the property investment market and the
need for clarification and codification of this in international standards.
Meaning and definition
The word ``worth'' and ``value'' are, in a number of languages, interchangeable. The
issue facing valuers is to define accurately concepts and/or tasks in such a way
that a clear understanding of these concepts and tasks is shared by valuers and
their clients both nationally and internationally. Once defined appropriate
methodologies can then be developed together with standards and guidance notes.
The RICS Red Book (1997a) provides UK valuers with definitions for most of
the tasks normally undertaken by valuers. These definitions include market
value and open market value within Practice Statement 4 (PS4). The only
explanation given for ``worth'' is to be found in a section on Definitions which
excludes market value but covers the phrase ``calculation of worth''. Critical to
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