{"id":81,"date":"2017-11-03T18:43:22","date_gmt":"2017-11-03T17:43:22","guid":{"rendered":"http:\/\/marcinmalmon.com\/eng10\/?p=81"},"modified":"2020-07-11T21:39:46","modified_gmt":"2020-07-11T19:39:46","slug":"inconsistent-yields-and-cash-flows-lead-to-lack-of-market-transparency","status":"publish","type":"post","link":"https:\/\/marcinmalmon.com\/english\/inconsistent-yields-and-cash-flows-lead-to-lack-of-market-transparency\/","title":{"rendered":"Inconsistent Yields and Cash Flows Lead to Lack of Market Transparency"},"content":{"rendered":"
Reading time:<\/span> 3<\/span> min.<\/span><\/span>

Poni\u017cej jeden z moich pierwszych tekst\u00f3w na temat braku transparentno\u015bci metodyki wyceny. Najwi\u0119ksze problemy dotycz\u0105 zw\u0142aszcza st\u00f3p zwrotu i sposob\u00f3w budowania projekcji cash flow<\/em>. Ten kr\u00f3tki artyku\u0142 ukaza\u0142 si\u0119 w REV Journal of the European Valuer<\/em> z kwietnia 2015. Najwyra\u017aniej zasygnalizowanie problemu zrobi\u0142o jakie\u015b wra\u017cenie, poniewa\u017c jednym z cel\u00f3w TEGoVA na najbli\u017csze lata jest w\u0142a\u015bnie rozwi\u0105zanie go i zharmonizowanie metodyki wyceny. Prace trwaj\u0105. Mo\u017ce wreszcie zaczniemy m\u00f3wi\u0107 jednym j\u0119zykiem…<\/p>\n

Inconsistent Yields and Cash Flows Lead to Lack of Market Transparency<\/h2>\n

Many types of yields<\/h3>\n

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
\nvariety of different types of yield, for example, initial yield, all risks yield, equivalent yield, equated yield, gross yield and net yield.<\/p>\n

The key lies in understanding that when for example a prime property has been sold at a 7% \u201cinitial yield\u201d this may perhaps actually translate into an 8% \u201cequivalent yield\u201d if the property was under-rented at the date of transaction or a 6% \u201cequivalent yield\u201d if \u201cover-rented\u201d. 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 \u201cinitial yield\u201d is often used as the simplest yardstick of property valuation \u2026 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
\nincluding European Valuation Standards have emphasised that Market Value excludes costs of sale or purchase.<\/p>\n

\"labyrynth-chaos\"

property-labytynth<\/p><\/div>\n

Lack of market data<\/h3>\n

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.<\/p>\n

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 \u201cimplicit\u201d or \u201cexplicit\u201d cash flow. This is fundamental and yet there is much confusion about these concepts.<\/p>\n

Implicit vs. explicit cash flows<\/h3>\n

In constructing an \u201cimplicit\u201d cash flow the valuer avoids any subjective assumptions about potential future market driven changes to income from a property. The market\u2019s perception of future income growth and risks is reflected in the yield (equivalent) itself, similar to an \u201call risks yield\u201d used in a simple traditional capitalisation approach.<\/p>\n

On the other hand an \u201cexplicit\u201d 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 \u201cequated yield\u201d. 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? \u2022<\/p>\n

A oto link do oryginalnego wydania:<\/p>\n

http:\/\/www.tegova.org\/data\/bin\/a56efb61d116cc_Journal%20of%20the%20Recognised%20European%20Valuer%20(11)%20April%202015.pdf<\/a><\/p>\n

Mo\u017ce zainteresuje Ci\u0119 te\u017c:<\/strong><\/p>\n

Jaki cash flow taka stopa<\/a><\/p>\n

Cicha rewolucja<\/a><\/p>\n<\/div><\/div>","protected":false},"excerpt":{"rendered":"

Reading time:<\/span> 3<\/span> min.<\/span><\/span> Poni\u017cej jeden z moich pierwszych tekst\u00f3w na temat braku transparentno\u015bci metodyki wyceny. Najwi\u0119ksze problemy dotycz\u0105 zw\u0142aszcza st\u00f3p zwrotu i sposob\u00f3w budowania projekcji cash flow. Ten kr\u00f3tki artyku\u0142 ukaza\u0142 si\u0119 w REV Journal of the European Valuer z kwietnia 2015. Najwyra\u017aniej zasygnalizowanie problemu zrobi\u0142o jakie\u015b wra\u017cenie, poniewa\u017c jednym z cel\u00f3w TEGoVA na najbli\u017csze lata jest w\u0142a\u015bnie […]<\/p>\n","protected":false},"author":1,"featured_media":84,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"episode_type":"","audio_file":"","cover_image":"","cover_image_id":"","duration":"","filesize":"","date_recorded":"","explicit":"","block":"","filesize_raw":""},"categories":[1,134],"tags":[32,28,31,29,30,34,33,37,36,35],"series":[],"episode_featured_image":"https:\/\/marcinmalmon.com\/english\/wp-content\/uploads\/sites\/11\/2017\/11\/maze-2166001_1920.jpg","episode_player_image":"https:\/\/marcinmalmon.com\/english\/wp-content\/plugins\/seriously-simple-podcasting\/assets\/images\/no-album-art.png","download_link":false,"player_link":false,"audio_player":false,"episode_data":{"playerMode":"dark","subscribeUrls":{"apple_podcasts":{"key":"apple_podcasts","url":"","label":"Apple Podcasts","class":"apple_podcasts","icon":"apple-podcasts.png"},"google_podcasts":{"key":"google_podcasts","url":"","label":"Google Podcasts","class":"google_podcasts","icon":"google-podcasts.png"},"spotify":{"key":"spotify","url":"","label":"Spotify","class":"spotify","icon":"spotify.png"},"stitcher":{"key":"stitcher","url":"","label":"Stitcher","class":"stitcher","icon":"stitcher.png"}},"rssFeedUrl":"https:\/\/marcinmalmon.com\/english\/feed\/podcast","embedCode":"

Inconsistent Yields and Cash Flows Lead to Lack of Market Transparency<\/a><\/blockquote>