Marcin Malmon


Szczerze o nieruchomościach

Tekst przeczytasz w 3 min.

Poniżej jeden z moich pierwszych tekstów na temat braku transparentności metodyki wyceny. Największe problemy dotyczą zwłaszcza stóp zwrotu i sposobów budowania projekcji cash flow. Ten krótki artykuł ukazał się w REV Journal of the European Valuer z kwietnia 2015. Najwyraźniej zasygnalizowanie problemu zrobiło jakieś wrażenie, ponieważ jednym z celów TEGoVA na najbliższe lata jest właśnie rozwiązanie go i zharmonizowanie metodyki wyceny. Prace trwają. Może wreszcie zaczniemy mówić jednym językiem…

Inconsistent Yields and Cash Flows Lead to Lack of Market Transparency

Many types of yields

One of the biggest barriers to transparency of the European real estate market is theadoption by valuers of a variety of yields in the valuation of investmentproperties by means of the income approach. Even within a single market such as Warsaw, valuers speak different languages, when it comes to defining yields. Anyone reading a selection of valuation or property market reports in relation to the Warsaw market at least, will not fail to notice reference to a
variety of different types of yield, for example, initial yield, all risks yield, equivalent yield, equated yield, gross yield and net yield.

The key lies in understanding that when for example a prime property has been sold at a 7% “initial yield” this may perhaps actually translate into an 8% “equivalent yield” if the property was under-rented at the date of transaction or a 6% “equivalent yield” if “over-rented”. Furthermore it is important to understand whether a quoted yield reflects costs of purchase or whether it is based on the contract price alone. The difference could be as much as 50 basis points. Confusion also arises because whereas “initial yield” is often used as the simplest yardstick of property valuation … which is current rent divided by the purchase price of the property, in some countries (including the UK) the latter includes purchase costs. And yet, for many years now all major valuation standards
including European Valuation Standards have emphasised that Market Value excludes costs of sale or purchase.



Lack of market data

But definition is only part of the problem, the other lies in deriving yields in markets where there may be few investment transactions. In such circumstances valuation truly becomes an art based on the valuer’s perception of market sentiment and a consensus on yields becomes established. Unfortunately such consensus is rather weak because of the lack of consistency in the nature of the yields adopted by valuers and market researchers.

Furthermore, in order for an investor to make the right choice of investment property he needs to understand whether his valuer has discounted the income flow from the property on the basis of an “implicit” or “explicit” cash flow. This is fundamental and yet there is much confusion about these concepts.

Implicit vs. explicit cash flows

In constructing an “implicit” cash flow the valuer avoids any subjective assumptions about potential future market driven changes to income from a property. The market’s perception of future income growth and risks is reflected in the yield (equivalent) itself, similar to an “all risks yield” used in a simple traditional capitalisation approach.

On the other hand an “explicit” cash flow reflects forecasts of future market driven changes in rental income and operational costs. This is normally achieved by rental indexation during the cash flow period and discounting by the adoption of a so called “equated yield”. Until there is some agreement within the valuation profession on the consistent adoption of yields and a harmonised approach to constructing discounted cash flows we cannot hope for true market transparency. At a time when European Valuation Standards are gaining traction across the continent is it not time for TEGoVA to seize the initiative? •


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