I recently attended a conference on green buildings and sustainability and I would like to mention four learnings that I took away. Some of it celebrates achievements, some of it is critical, some is a collection of (hopefully) interesting facts and statements, and some, well, just illustrates how blond one can be at times.
Do you want to know the blond part first? Okay, you twisted my arm. By the way, I mean no disrespect to people with blond hair, I’m just lazily borrowing a steoreotype. For lunch on the first day, and when they eventually set all the hungry people free, everyone including myself ran like never before to get first to the lunch stalls (we don’t care if you don’t get any food as long as we have – survival is the fundamental human need; I’m just quoting Maslow’s hierarchy of needs, that’s all). As we rush into the exhibition area looking around for food I see people eating delicious foodstuffs, but I don’t see where they get it from. So not to look too desperate and hungry, I decide to casually stroll around the exhibition area and hopefully come across the food stalls. As I’m walking with one hand in pocket showing no physical signs of malnutrition and deprivation of liquids, I spot a group of people at some cooldrink stalls but alas, no food stalls. I join the line and non-chalantly asks the server behind the counter: “Are these cooldrinks complimentary?” To which he replies: “Yes, sir, what would you like.” I indicated the Ginger Ale and strolled off.
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Forms of Land Tenure
/in Property Valuation/by David J v VuurenOwnership is a real right that cedes absolute control over a specific property. An owner is entitled to possess and occupy his property. It is, however, possible to possess a property and not occupy it, and to occupy it and not possess it. Two interesting points is, firstly, both possession and occupation requires some form of physical control whether directly (physical occupation) or indirectly (owner has the keys to the property). Secondly, the difference in terms of these is the possessorís intention to be the owner while the occupierís intention is to gain some benefit from occupying the property. In order to understand the network of rights in property, an organizational chart delineating the different types of rights would assist in this process (see Fig. 1 below).
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Market vs Fair Value
/in Property Valuation/by David J v VuurenWHAT IS MARKET VALUE?
“Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
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Valuation Methods
/in Property Valuation/by David J v VuurenIn property valuations there are 5 generally accepted methods or approaches to value. These are the Sales Comparison-, the Income Capitalisation-, the Depreciated Replacement Cost (DRC)-, the Residual-, and the Profits method.
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ABC of Valuations
/in Property Valuation/by David J v VuurenRead more
Broken Windows Theory
/in Insurance Valuation, Property Valuation/by David J v VuurenThe broken windows theory is a criminology theory introduced in 1982 by social scientists James Q. Wilson and George L. Kelling. The theory is the subject of a great many debates and criticisms, although various studies are in support of it.
Wilson and Kelling is of the opinion that crime is the result of disorder. If a window is broken and left unrepaired, passersby might conclude that little care is exercised and that there is no control. The effect of this is more broken windows that in turn sends a signal that there is no order. The theory is therefore one of norm setting and the associated signaling effect of urban disorder and vandalism leading to serious crime and anti-social behaviour.
In an urban or city environment, broken windows can be anything from literal broken windows to graffiti, public disorder, or aggressive panhandling. (Wikipedia, 2012).
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Celebrate, critical, collection and (blond)
/in Property Valuation/by David J v VuurenI recently attended a conference on green buildings and sustainability and I would like to mention four learnings that I took away. Some of it celebrates achievements, some of it is critical, some is a collection of (hopefully) interesting facts and statements, and some, well, just illustrates how blond one can be at times.
Do you want to know the blond part first? Okay, you twisted my arm. By the way, I mean no disrespect to people with blond hair, I’m just lazily borrowing a steoreotype. For lunch on the first day, and when they eventually set all the hungry people free, everyone including myself ran like never before to get first to the lunch stalls (we don’t care if you don’t get any food as long as we have – survival is the fundamental human need; I’m just quoting Maslow’s hierarchy of needs, that’s all). As we rush into the exhibition area looking around for food I see people eating delicious foodstuffs, but I don’t see where they get it from. So not to look too desperate and hungry, I decide to casually stroll around the exhibition area and hopefully come across the food stalls. As I’m walking with one hand in pocket showing no physical signs of malnutrition and deprivation of liquids, I spot a group of people at some cooldrink stalls but alas, no food stalls. I join the line and non-chalantly asks the server behind the counter: “Are these cooldrinks complimentary?” To which he replies: “Yes, sir, what would you like.” I indicated the Ginger Ale and strolled off.
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The art of applying functional property investment understanding
/in Property Valuation/by Deon J v VuurenHere is seven aspects to property investment that I have found to be helpful over the years:
Look at the big AND small picture
Property should be viewed from both a macro and micro perspective, taking into account the big picture and micro activity within the suburb or immediate geographical area. For example, the general demand and future (improved) rights within a property zone over the next 5 years.
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Residential property values determined by comparable sales
/in Property Valuation/by Clive FrancisWhen a request is made for a property valuation, the applicant and others tend to ask me as soon as I have completed an inspection of the site, “So, what do you think the property is worth?”
It makes me think of a patient asking a medical doctor whether a tumour is malignant before a biopsy is carried out. In both instances it is recommended to carry out tests and analyse certain facts before stating, what may appear to others to be a quick and easy conclusion.
Some of the factors to consider are, inter alia, the attributes of the subject property vis-a-vis that of recently concluded sales of comparable type properties within the same and/or immediate area:
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The Professional Property Valuer
/in Property Valuation/by Deon J v VuurenA professional property valuer is a person that has an accumulated knowledge of the building industry, understanding financial investment criteria and economical markets. A professional property valuer can gather, analyse and deduce reliable information for rational interpretation. The key function of a valuer is to explain and present complex assumptions and derivatives in an understandable matter. The data statistics should be transparent and all assumptions needs to comply with logic and motivational reasoning i.e. “apply your mind” as a wise architect once informed me.
No value is predeterminable, only as the concluded assumptions and market related information are applied does the bottom-line or final valuation appear. A professional property valuer cannot form a personal opinion separate from the data and therefore can only express the opinion as derived from the market. The result is a valuation that is only as credible as the data and assumptions on which it is based.
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Price of Land
/in Property Valuation/by Deon J v VuurenThe market value of any property, in simple terms, is whatever someone is willing to pay for that property and other similar properties. Land is fixed in supply (we only have one earth), therefore value is determined by supply and demand. The price of land is a function of how the land is utilized in terms of its most profitable use given the location and (economic) preferences of consumers and the society.
The productivity of land can be optimized with the greater demand and the more intensive application of capital. The available land stock at a specific point in time is fixed in price, but will gradually relax or become more elastic as the period extends and the same or lesser demand remain. A typical full circle property cycle for South Africa is every 20 years, therefore property investments and risk analysis should be based on a minimum time frame of between 10 to 15 years. The price of land is in correlation to the earnings in excess over and above the opportunity cost required, though capital growth can be factored as long as realistic assumptions are termed.
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