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Journal cover: Journal of Property Investment & Finance

Journal of Property Investment & Finance

ISSN: 1463-578X
Previously published as: Journal of Property Valuation and Investment

Online from: 1999

Subject Area: Built Environment

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Real estate market dynamics during capital market imbalances


Document Information:
Title:Real estate market dynamics during capital market imbalances
Author(s):Thomas Hamilton, (University of St Thomas Opus College of Business, Minneapolis, Minnesota, USA)
Citation:Thomas Hamilton, (2011) "Real estate market dynamics during capital market imbalances", Journal of Property Investment & Finance, Vol. 29 Iss: 4/5, pp.359 - 371
Keywords:Asset valuation, Bubble, Capital markets, Cash equivalence, Disequilibrium, Prices
Article type:Conceptual paper
DOI:10.1108/14635781111150295 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Abstract:

Purpose – The major purpose of this paper is to refocus the appraisal profession on estimating value rather than explaining price. The appraisal profession itself encompasses many disciplines of valuation beyond real estate, and transcends disciplines such as economics, the construction trades, business, finance, law, government, statistics, mathematics, geography, geology, mapping, and information sciences.

Design/methodology/approach – This paper describes how rapidly changing capital market conditions greatly affected transaction prices for real estate when underlying economic fundamental values of these properties remained unchanged. As such, differences between transaction prices and underlying economic value can be determined when capital markets rapidly expand or contract.

Findings – Most of the concepts, methods, processes, and techniques that appraisers use today are the direct result of studies performed within the academic community and most often from some other related field of study, rather than from pure valuation research itself. This is where the problems with which one is living today have erupted.

Originality/value – Property values and transaction prices are two very different beasts: value is a concept, whereas price is a reality. Appraisers have somehow forgotten that the price paid for real estate can be quite different from the value of that same parcel of real estate.



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