Property Development Essay Example | Topics and Well Written Essays - 3000 words

Property Development - Essay Example With the help of a case example the paper will mainly highlight the merits of traditional residual valuation approach over other valuation methods. Property valuation and different property valuation techniques has been a subject of intense discussion between researchers, academicians and developers. Different approaches to property valuation have been widely contested between different stakeholders. The issue of property appraisal often takes socio-political color due to the range of stakeholders directly affected by the process. According to Williams and Ventolo (2001, p-65), market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably and assuming the price is not affected by undue stimulus. Though the theoretically property valuation is defined by some others Hamid (1996)"as means to interpret market without the personal bias, value, emotion and poor assumption", property appraisal is often looked from a personal perspectives of buyers and sellers. Kahr and Thomsett (2005; p-48) states that valuation is distinguished via attributes of properties and markets; further classification of value are based upon the priorities of investors or owners, including cash flow and potential rental income tax benefits or limitations and perception of future growth in market value. Principles that guide the valuation are: Progression: this principle implies that the value of property will increase due to market demand and better locality. Regression: this principle implies that opposite of above principle also holds true when the value of a property may decrease due to negative market sentiments. Conformity: The principle states that valuation of property tends to appreciate with the similar properties in a similar location. Substitution: This principle implies that a property's greatest potential market value is also limited by the valuation of similar properties in a similar locality. Change: This principle tells that all variables used for valuation tend to change resulting in changes in value of the property. Anticipation: This principle implies that valuation depends upon the expectation of future growth. Contribution: This principle states that the investment on an existing property may contribute in valuation, though it is not necessary that increase in valuation is equal to investment. Plottage: This principle implies that the consistency in ownership, zoning and usage of land tend to increase the value of land. Highest and best value: This principle states that the value of a land is maximum when the land is utilized in best possible manner. Competition: This principle implies that the valuation of a property varies according to supply and demand of properties in market. Property appraisal aims to determine different type of values such as market value, value in use, investment value, insurance and taxable value, and liquidation value, which gives rise to need of different valuation methods and standards. These valuation systems also vary in different countries according to their laws and economic practices. In, UK five valuation methods are used which are discussed in following sections whereas in US