Introducing Property Valuation

Citation

French, N. (2013), "Introducing Property Valuation", Journal of Property Investment & Finance, Vol. 31 No. 1, pp. 106-107. https://doi.org/10.1108/14635781311293015

This book is the clone of the plethora of property valuation textbooks that have come before an, no doubt will come again. There is nothing intrinsically wrong with it or its clone sisters (Millington, 2001; Isaac and O'Leary, 2012) but they all simply present “what valuers do” with little insight or analysis. These are training manuals, not textbooks. The valuation profession suffers when compared to, say, business valuers because we learn to do things by rote and not fully understand what it is that we do. These books suffer from not doing that. They simply divide the world of property valuation into a number of sections and sub headings and then describes and illustrates valuations with in each. In Blackledge's case, the book divides as follows.

Part I: background

•  1. Economic context.

•  2. The property valuation profession.

•  3. Investment.

Part II: valuation mathematics

•  4. Compounding and discounting.

•  5. Sinking funds and mortgages.

•  6. Capitalisation.

•  7. Alternative valuation tables and formulae.

Part III: valuation methods

•  8. Methods of measurement.

•  9. Rics valuation standards (The Red Book).

• 10.

  Comparison method.

• 11.

  Investment method.

• 12.

  Investment method: discounted cash flow method.

• 13.

  Residual method.

• 14.

  Profits method.

• 15.

  Cost methods.

Part IV: applied valuations

• 16.

  Landlord and tenant valuations.

My problem with this book is that it predominantly describes and does not explain. It repeats what is done “in practice” and thus perpetuates misunderstandings and misconceptions, From reading g the book, you would think that explicit discounted cash flow (DCF) is some mythical technique that was set up to usurp the role of (implicit) traditional[1] methods. Implicit models a re short cuts to explicit discounted cash flow models; they are one and the same. To present them as anything different is a misrepresentation. DCF is not an accounting technique as the book states. Yes, it is used in accountancy but it is used in finance, business, investment and the valuation of all assets and businesses. It is not imported from America; its origins actually can be traced back to the Greeks and Romans. Since there has been interest paid, there has been discounting. It is a universal technique of present valuing. Of course it is not a panacea. It relies upon the valuer correctly assessing and applying the assumptions underpinning the market but all it does is make explicit the assumptions that are hidden in implicit models.

Likewise, the section on leasehold valuations is so out of date it is worrying. As witness by the lack of references to academic journals, the author misses out 20‐30 years of insightful articles on valuations methods.

The other major issue that I find disturbing is that in the twenty‐first century, in the days of spreadsheets and calculation apps, is that a substantial amount of the book is dedicated to valuation tables. I have been teaching for 30 years and I have never taught the use of valuation tables. It is the equivalent of a mathematician still teaching how to use a slide rule. It is an embarrassment to the valuation profession that we have university courses and core texts still promoting the use of tables.

That said, this book is no worse or better than many of the valuation texts available in the UK. Will I recommend it to students? No. It offers very little insight or exposition of the importance of fully understanding valuations. If our role as educators is to simply train the next generation to repeat the ways that we have valued (maybe erroneously) from the 1960s thorough to the noughties, then fine. But I believe that education and text books should the next generation to understand and to think. Property valuers need to be able to questions and to understand the processes and approaches to valuation and, forgive the pun, to add value. A text book that simply says “this is how we do it” to my mind fails in its objective to educate.

Notes

The term “traditional” is also unfortunate and its use is perpetuated by texts of this nature. It is an implicit model. It should be called implicit.