Jan Reinert - Academia.edu (original) (raw)

Papers by Jan Reinert

Research paper thumbnail of Equivalent Yields and Ex-Post Property Valuations in the UK

Research paper thumbnail of Accuracy of the German income approach in comparison to German DCF valuations

Journal of Property Research, May 5, 2020

The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stab... more The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stable estimations of value that do not adequately represent market movements. So far, empirical evidence has been scarce. The first part of the analysis consisted of a direct comparison of actual valuations and sale prices according to GIA and DCF models in Germany. The second part of the analysis used hedonic regressions to derive fitted sale prices that could be compared to valuations of held properties in order to assess valuation accuracy on a larger and more homogenous dataset. The Heckman Correction was used to reduce the impact of sample selection bias. The research hypothesis, that GIA valuations and DCF valuations result in equally accurate proxies for market prices, could not be rejected. Both techniques produced on average a comparable amount of valuations within the selected threshold of 15%. This finding suggests that the underlying valuation technique, at least with respect to DCF and GIA, is not able to explain the observed smoothness of German valuationbased indices. Future research should focus on a country comparison of valuation accuracy in order to put the results of this study into perspective.

Research paper thumbnail of Comparison of the DCF and German income approach

Journal of Property Investment & Finance, Feb 4, 2019

Purpose The majority of institutional investors in Germany use the German income approach (GIA) w... more Purpose The majority of institutional investors in Germany use the German income approach (GIA) while investors abroad prefer the discounted cash flow (DCF). The debate around the two methods has been largely theoretical, lacking large-scale empirical evidence. The paper aims to discuss this issue. Design/methodology/approach The analysis consisted of a performance comparison and hedonic regressions based on ordinary least squares. Fitted GIA and DCF values were obtained for all observations in the data set in order to eliminate distortions caused by different property characteristics in the two valuation sub-samples. Findings The research hypothesis, stating that the two methods result in statistically identical estimations of value, was rejected. The performance analysis showed that GIA valuations displayed smoother total return performance due to less volatile capital growth in comparison to DCF valuations. Comparing the fitted values obtained from the regressions showed that GIA valuations were on average lower than their DCF counterparts. The difference was small and both methods resulted in very similar fitted values. The difference between fitted values was not constant over time and decreased toward the end of the analysis period. Practical implications The research adds empirical arguments to the ongoing debate between GIA and DCF valuations. So far empirical proof has been scarce or one-sided. Originality/value This analysis is the first large-scale empirical comparison of the DCF and the GIA within the same market.

Research paper thumbnail of Internal Valuations and Valuation Accuracy in Germany

This paper is an analysis of the performance and accuracy of internal and external property valua... more This paper is an analysis of the performance and accuracy of internal and external property valuations in Germany. Potential problems with appraised property values as estimators for true market prices are well documented by theoretical and empirical studies. Many issues, among them client influence and time lacks, are generally believed to be even more pronounced in internal property valuations. A unique dataset of over 4,000 individual properties between 2000 and 2013 is used for the analysis. A simple performance analysis shows that internal valuations follow external valuations with a time lack of approximately one period and that internal valuations react more volatile to market changes than external valuations. The main analysis reveals that over the time period under investigation internal valuations have significantly higher appraised values per square metre than external valuations. In order to assess valuation accuracy real transaction data is used to derive hedonic transaction prices. The Heckman correction is employed to correct for possible sample selection bias. The difference between the theoretical transaction price and the actual valuation can be used as an indicator for valuation accuracy. Preliminary results show that internal valuations are slightly above their market price while external valuations are slightly below the price achieved in the market. Both approaches produce on average accurate estimatiors of market prices with external valuations being slightly closer to transaction prices.

Research paper thumbnail of The German way of valuing property: Investigating the difference between discounted cash flow and the German income approach

RePEc: Research Papers in Economics, 2012

The German property market differs from most of its international counterparts in its comparative... more The German property market differs from most of its international counterparts in its comparatively low but remarkably stable performance over the past decades. One of the possible reasons for this anomaly could be the German appraisal method referred to as the German Income Approach (Ertragswertverfahren) which is often said to result in an even smoother pattern than the internationally applied Discounted Cash Flow technique. Due to an increasing number of German investors using DCF it was possible to assemble a dataset of almost 3,000 individual German office & retail properties from 2005 to 2010 with a sufficiently large proportion of DCF valuations to allow for a meaningful comparison within the same market. In order to establish whether and to what extent GIA valuations differ from DCF valuations two separate hedonic indices are derived. A novelty of the paper is the integration of valuation and transaction data. Market data is used to derive transaction prices for every property over the time period under investigation. This theoretical transaction price is used to approximate the average margin of error for each appraisal technique. The Heckman two-step procedure (Heckman, 1979) is employed in order to correct for possible sample selection bias. The objective of this paper is to offer more insight into the question which appraisal method more accurately predicts transaction prices on the German property market. A preliminary analysis indicates that there are significant differences between valuations following DCF and GIA.

Research paper thumbnail of Valuation accuracy of external and internal property valuations in Germany

Journal of Property Research, Feb 13, 2021

ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the c... more ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the closer relationship between valuers and clients among internal valuations may raise additional concerns regarding the independence of the valuer and hence the objectivity of the result. This paper analyses how internal and external valuations differ in their ability to mirror market prices. The dataset for the analyses contained 4,805 commercial properties in Germany between 1995 and 2013. The first part of the analysis was a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties. It showed that a majority of both valuation types had a valuation error within the acceptable threshold of 15% but that external valuations were on average significantly closer to sale prices than internal valuations. Due to sample selection issues, a second analysis, called Actual Valuation and Fitted Sale Price Comparison, was carried out. Real transactions were used to derive hedonic prices that could be compared against valuations of held properties. The Heckman Correction was used to mitigate sample selection bias. The results showed that both valuation types produced a majority of observations within the set threshold but that external valuations were on average closer to sale prices than internal valuations.

Research paper thumbnail of To Hold or Not to Hold? The Development of Holding Period Length Across Several European Markets

Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria, 2013

Finance literature on holding periods suggests that illiquidity and high transaction costs can le... more Finance literature on holding periods suggests that illiquidity and high transaction costs can lead to longer holding periods while return volatility leads to shorter holding periods. Since real estate is a very illiquid asset with high transaction costs, holding periods tend to be longer and strongly linked to performance with the risk of underperformance higher over shorter investment horizons. Several market observers claim that holding periods have been decreasing over the past decades. Ceteris paribus that would imply deteriorating performance. However, shorter holding periods could also be explained by decreasing transaction costs, increasing return volatility or other factors.This paper is going to analyze and compare the development in holding periods for several European real estate markets. While a comparison between different countries will be carried out, the main focus will be on the UK market for which the longest time series is available.A regression model is used in an effort to quantify the impact of increasing transaction costs, in particular taxes, on holding period length in order to determine how changes in legislature affect the market. Finally insights gained from the link between holding periods and investment performance can provide useful guidelines for portfolio managers.Data on sale and purchase dates, transaction costs and individual property performance for several countries is supplied by IPD Investment Property Databank. A preliminary analysis suggests that average holding periods and deviations from the mean differ substantially between countries. The Netherlands seem to have had the longest average holding period with the largest standard deviation. The shortest average holding period could be found in Sweden while France had the smallest deviation of holding periods. Data for the UK is still pending.

Research paper thumbnail of To Hold or Not to Hold? The Development of Holding Period Length Across Several European Markets

20th Annual European Real Estate Society Conference, Jul 3, 2013

Finance literature on holding periods suggests that illiquidity and high transaction costs can le... more Finance literature on holding periods suggests that illiquidity and high transaction costs can lead to longer holding periods while return volatility leads to shorter holding periods. Since real estate is a very illiquid asset with high transaction costs, holding periods tend to be longer and strongly linked to performance with the risk of underperformance higher over shorter investment horizons. Several market observers claim that holding periods have been decreasing over the past decades. Ceteris paribus that would imply deteriorating performance. However, shorter holding periods could also be explained by decreasing transaction costs, increasing return volatility or other factors.This paper is going to analyze and compare the development in holding periods for several European real estate markets. While a comparison between different countries will be carried out, the main focus will be on the UK market for which the longest time series is available.A regression model is used in an effort to quantify the impact of increasing transaction costs, in particular taxes, on holding period length in order to determine how changes in legislature affect the market. Finally insights gained from the link between holding periods and investment performance can provide useful guidelines for portfolio managers.Data on sale and purchase dates, transaction costs and individual property performance for several countries is supplied by IPD Investment Property Databank. A preliminary analysis suggests that average holding periods and deviations from the mean differ substantially between countries. The Netherlands seem to have had the longest average holding period with the largest standard deviation. The shortest average holding period could be found in Sweden while France had the smallest deviation of holding periods. Data for the UK is still pending.

Research paper thumbnail of Valuation accuracy across Europe: a mass appraisal approach

Journal of Property Research, 2020

The aim of this paper was to compare valuation accuracy of eight European markets, using the same... more The aim of this paper was to compare valuation accuracy of eight European markets, using the same time period, data source and methodology. The emphasis was placed on the accuracy of held properties because previous studies showed that sold properties tend to be valued closer to the market. Real sales data was used to derive hedonic sale prices. The Heckman correction was employed to correct for sample selection bias. A comparison of simple differences between actual valuations and fitted prices showed that valuations were on average below fitted prices in all countries except the Netherlands, indicating a possible overvaluation problem of held properties in Europe. A comparison of the absolute difference showed that the Netherlands and Switzerland displayed the highest valuation accuracy. Italy and Sweden on the other hand were the markets with the lowest median valuation accuracy and largest spreads of observations. All countries, except Sweden, had a majority of observations within an absolute difference of 20%. The two most interesting conclusions from the analysis were that Germany and Switzerland did not differ significantly from other markets in terms of valuation accuracy and that Sweden was consistently the market with the lowest valuation accuracy.

Research paper thumbnail of Internal Valuations and Valuation Accuracy in Germany

This paper is an analysis of the performance and accuracy of internal and external property valua... more This paper is an analysis of the performance and accuracy of internal and external property valuations in Germany. Potential problems with appraised property values as estimators for true market prices are well documented by theoretical and empirical studies. Many issues, among them client influence and time lacks, are generally believed to be even more pronounced in internal property valuations. A unique dataset of over 4,000 individual properties between 2000 and 2013 is used for the analysis. A simple performance analysis shows that internal valuations follow external valuations with a time lack of approximately one period and that internal valuations react more volatile to market changes than external valuations. The main analysis reveals that over the time period under investigation internal valuations have significantly higher appraised values per square metre than external valuations. In order to assess valuation accuracy real transaction data is used to derive hedonic transa...

Research paper thumbnail of Valuation accuracy of external and internal property valuations in Germany

Journal of Property Research, 2021

ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the c... more ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the closer relationship between valuers and clients among internal valuations may raise additional concerns regarding the independence of the valuer and hence the objectivity of the result. This paper analyses how internal and external valuations differ in their ability to mirror market prices. The dataset for the analyses contained 4,805 commercial properties in Germany between 1995 and 2013. The first part of the analysis was a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties. It showed that a majority of both valuation types had a valuation error within the acceptable threshold of 15% but that external valuations were on average significantly closer to sale prices than internal valuations. Due to sample selection issues, a second analysis, called Actual Valuation and Fitted Sale Price Comparison, was carried out. Real transactions were used to derive hedonic prices that could be compared against valuations of held properties. The Heckman Correction was used to mitigate sample selection bias. The results showed that both valuation types produced a majority of observations within the set threshold but that external valuations were on average closer to sale prices than internal valuations.

Research paper thumbnail of Equivalent Yields and Ex-Post Property Valuations in the UK

Research paper thumbnail of Accuracy of the German income approach in comparison to German DCF valuations

Journal of Property Research, 2020

The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stab... more The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stable estimations of value that do not adequately represent market movements. So far, empirical evidence has been scarce. The first part of the analysis consisted of a direct comparison of actual valuations and sale prices according to GIA and DCF models in Germany. The second part of the analysis used hedonic regressions to derive fitted sale prices that could be compared to valuations of held properties in order to assess valuation accuracy on a larger and more homogenous dataset. The Heckman Correction was used to reduce the impact of sample selection bias. The research hypothesis, that GIA valuations and DCF valuations result in equally accurate proxies for market prices, could not be rejected. Both techniques produced on average a comparable amount of valuations within the selected threshold of 15%. This finding suggests that the underlying valuation technique, at least with respect to DCF and GIA, is not able to explain the observed smoothness of German valuationbased indices. Future research should focus on a country comparison of valuation accuracy in order to put the results of this study into perspective.

Research paper thumbnail of The German way of valuing property: Investigating the difference between discounted cash flow and the German income approach

Proceedings of the 19th Annual European Real Estate Society Conference - Edinburgh, Scotland, 2012

The German property market differs from most of its international counterparts in its comparative... more The German property market differs from most of its international counterparts in its comparatively low but remarkably stable performance over the past decades. One of the possible reasons for this anomaly could be the German appraisal method referred to as the German Income Approach (Ertragswertverfahren) which is often said to result in an even smoother pattern than the internationally applied Discounted Cash Flow technique. Due to an increasing number of German investors using DCF it was possible to assemble a dataset of almost 3,000 individual German office & retail properties from 2005 to 2010 with a sufficiently large proportion of DCF valuations to allow for a meaningful comparison within the same market. In order to establish whether and to what extent GIA valuations differ from DCF valuations two separate hedonic indices are derived. A novelty of the paper is the integration of valuation and transaction data. Market data is used to derive transaction prices for every property over the time period under investigation. This theoretical transaction price is used to approximate the average margin of error for each appraisal technique. The Heckman two-step procedure (Heckman, 1979) is employed in order to correct for possible sample selection bias. The objective of this paper is to offer more insight into the question which appraisal method more accurately predicts transaction prices on the German property market. A preliminary analysis indicates that there are significant differences between valuations following DCF and GIA.

Research paper thumbnail of Comparison of the DCF and German income approach

Journal of Property Investment & Finance, 2019

Purpose The majority of institutional investors in Germany use the German income approach (GIA) w... more Purpose The majority of institutional investors in Germany use the German income approach (GIA) while investors abroad prefer the discounted cash flow (DCF). The debate around the two methods has been largely theoretical, lacking large-scale empirical evidence. The paper aims to discuss this issue. Design/methodology/approach The analysis consisted of a performance comparison and hedonic regressions based on ordinary least squares. Fitted GIA and DCF values were obtained for all observations in the data set in order to eliminate distortions caused by different property characteristics in the two valuation sub-samples. Findings The research hypothesis, stating that the two methods result in statistically identical estimations of value, was rejected. The performance analysis showed that GIA valuations displayed smoother total return performance due to less volatile capital growth in comparison to DCF valuations. Comparing the fitted values obtained from the regressions showed that GIA...

Research paper thumbnail of Property Valuations and Valuation Accuracy in Germany and Europe

Due to the special attributes of real estate as an asset class, property values are not readily o... more Due to the special attributes of real estate as an asset class, property values are not readily observable on the market and therefore the industry depends heavily on valuations to estimate the value of a property at a specific moment in time. The ability of valuations to accurately mirror market values is therefore of vital importance. This collection of papers summarizes the analyses of different aspects of property valuations in Germany that may contribute to the observed stability of German property values in comparison to other countries. The analyses included a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties, and an Actual Valuation and Fitted Sale Price Comparison, based on held properties. The Heckman Correction was used to reduce the impact of sample selection bias in the transaction regressions. The first analysis compared the German Income Approach (GIA) with valuations according to the Discounted Cash Flow (DCF) approach. The results ...

Research paper thumbnail of Equivalent Yields and Ex-Post Property Valuations in the UK

Research paper thumbnail of Accuracy of the German income approach in comparison to German DCF valuations

Journal of Property Research, May 5, 2020

The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stab... more The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stable estimations of value that do not adequately represent market movements. So far, empirical evidence has been scarce. The first part of the analysis consisted of a direct comparison of actual valuations and sale prices according to GIA and DCF models in Germany. The second part of the analysis used hedonic regressions to derive fitted sale prices that could be compared to valuations of held properties in order to assess valuation accuracy on a larger and more homogenous dataset. The Heckman Correction was used to reduce the impact of sample selection bias. The research hypothesis, that GIA valuations and DCF valuations result in equally accurate proxies for market prices, could not be rejected. Both techniques produced on average a comparable amount of valuations within the selected threshold of 15%. This finding suggests that the underlying valuation technique, at least with respect to DCF and GIA, is not able to explain the observed smoothness of German valuationbased indices. Future research should focus on a country comparison of valuation accuracy in order to put the results of this study into perspective.

Research paper thumbnail of Comparison of the DCF and German income approach

Journal of Property Investment & Finance, Feb 4, 2019

Purpose The majority of institutional investors in Germany use the German income approach (GIA) w... more Purpose The majority of institutional investors in Germany use the German income approach (GIA) while investors abroad prefer the discounted cash flow (DCF). The debate around the two methods has been largely theoretical, lacking large-scale empirical evidence. The paper aims to discuss this issue. Design/methodology/approach The analysis consisted of a performance comparison and hedonic regressions based on ordinary least squares. Fitted GIA and DCF values were obtained for all observations in the data set in order to eliminate distortions caused by different property characteristics in the two valuation sub-samples. Findings The research hypothesis, stating that the two methods result in statistically identical estimations of value, was rejected. The performance analysis showed that GIA valuations displayed smoother total return performance due to less volatile capital growth in comparison to DCF valuations. Comparing the fitted values obtained from the regressions showed that GIA valuations were on average lower than their DCF counterparts. The difference was small and both methods resulted in very similar fitted values. The difference between fitted values was not constant over time and decreased toward the end of the analysis period. Practical implications The research adds empirical arguments to the ongoing debate between GIA and DCF valuations. So far empirical proof has been scarce or one-sided. Originality/value This analysis is the first large-scale empirical comparison of the DCF and the GIA within the same market.

Research paper thumbnail of Internal Valuations and Valuation Accuracy in Germany

This paper is an analysis of the performance and accuracy of internal and external property valua... more This paper is an analysis of the performance and accuracy of internal and external property valuations in Germany. Potential problems with appraised property values as estimators for true market prices are well documented by theoretical and empirical studies. Many issues, among them client influence and time lacks, are generally believed to be even more pronounced in internal property valuations. A unique dataset of over 4,000 individual properties between 2000 and 2013 is used for the analysis. A simple performance analysis shows that internal valuations follow external valuations with a time lack of approximately one period and that internal valuations react more volatile to market changes than external valuations. The main analysis reveals that over the time period under investigation internal valuations have significantly higher appraised values per square metre than external valuations. In order to assess valuation accuracy real transaction data is used to derive hedonic transaction prices. The Heckman correction is employed to correct for possible sample selection bias. The difference between the theoretical transaction price and the actual valuation can be used as an indicator for valuation accuracy. Preliminary results show that internal valuations are slightly above their market price while external valuations are slightly below the price achieved in the market. Both approaches produce on average accurate estimatiors of market prices with external valuations being slightly closer to transaction prices.

Research paper thumbnail of The German way of valuing property: Investigating the difference between discounted cash flow and the German income approach

RePEc: Research Papers in Economics, 2012

The German property market differs from most of its international counterparts in its comparative... more The German property market differs from most of its international counterparts in its comparatively low but remarkably stable performance over the past decades. One of the possible reasons for this anomaly could be the German appraisal method referred to as the German Income Approach (Ertragswertverfahren) which is often said to result in an even smoother pattern than the internationally applied Discounted Cash Flow technique. Due to an increasing number of German investors using DCF it was possible to assemble a dataset of almost 3,000 individual German office & retail properties from 2005 to 2010 with a sufficiently large proportion of DCF valuations to allow for a meaningful comparison within the same market. In order to establish whether and to what extent GIA valuations differ from DCF valuations two separate hedonic indices are derived. A novelty of the paper is the integration of valuation and transaction data. Market data is used to derive transaction prices for every property over the time period under investigation. This theoretical transaction price is used to approximate the average margin of error for each appraisal technique. The Heckman two-step procedure (Heckman, 1979) is employed in order to correct for possible sample selection bias. The objective of this paper is to offer more insight into the question which appraisal method more accurately predicts transaction prices on the German property market. A preliminary analysis indicates that there are significant differences between valuations following DCF and GIA.

Research paper thumbnail of Valuation accuracy of external and internal property valuations in Germany

Journal of Property Research, Feb 13, 2021

ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the c... more ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the closer relationship between valuers and clients among internal valuations may raise additional concerns regarding the independence of the valuer and hence the objectivity of the result. This paper analyses how internal and external valuations differ in their ability to mirror market prices. The dataset for the analyses contained 4,805 commercial properties in Germany between 1995 and 2013. The first part of the analysis was a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties. It showed that a majority of both valuation types had a valuation error within the acceptable threshold of 15% but that external valuations were on average significantly closer to sale prices than internal valuations. Due to sample selection issues, a second analysis, called Actual Valuation and Fitted Sale Price Comparison, was carried out. Real transactions were used to derive hedonic prices that could be compared against valuations of held properties. The Heckman Correction was used to mitigate sample selection bias. The results showed that both valuation types produced a majority of observations within the set threshold but that external valuations were on average closer to sale prices than internal valuations.

Research paper thumbnail of To Hold or Not to Hold? The Development of Holding Period Length Across Several European Markets

Proceedings of the 20th Annual European Real Estate Society Conference - Vienna, Austria, 2013

Finance literature on holding periods suggests that illiquidity and high transaction costs can le... more Finance literature on holding periods suggests that illiquidity and high transaction costs can lead to longer holding periods while return volatility leads to shorter holding periods. Since real estate is a very illiquid asset with high transaction costs, holding periods tend to be longer and strongly linked to performance with the risk of underperformance higher over shorter investment horizons. Several market observers claim that holding periods have been decreasing over the past decades. Ceteris paribus that would imply deteriorating performance. However, shorter holding periods could also be explained by decreasing transaction costs, increasing return volatility or other factors.This paper is going to analyze and compare the development in holding periods for several European real estate markets. While a comparison between different countries will be carried out, the main focus will be on the UK market for which the longest time series is available.A regression model is used in an effort to quantify the impact of increasing transaction costs, in particular taxes, on holding period length in order to determine how changes in legislature affect the market. Finally insights gained from the link between holding periods and investment performance can provide useful guidelines for portfolio managers.Data on sale and purchase dates, transaction costs and individual property performance for several countries is supplied by IPD Investment Property Databank. A preliminary analysis suggests that average holding periods and deviations from the mean differ substantially between countries. The Netherlands seem to have had the longest average holding period with the largest standard deviation. The shortest average holding period could be found in Sweden while France had the smallest deviation of holding periods. Data for the UK is still pending.

Research paper thumbnail of To Hold or Not to Hold? The Development of Holding Period Length Across Several European Markets

20th Annual European Real Estate Society Conference, Jul 3, 2013

Finance literature on holding periods suggests that illiquidity and high transaction costs can le... more Finance literature on holding periods suggests that illiquidity and high transaction costs can lead to longer holding periods while return volatility leads to shorter holding periods. Since real estate is a very illiquid asset with high transaction costs, holding periods tend to be longer and strongly linked to performance with the risk of underperformance higher over shorter investment horizons. Several market observers claim that holding periods have been decreasing over the past decades. Ceteris paribus that would imply deteriorating performance. However, shorter holding periods could also be explained by decreasing transaction costs, increasing return volatility or other factors.This paper is going to analyze and compare the development in holding periods for several European real estate markets. While a comparison between different countries will be carried out, the main focus will be on the UK market for which the longest time series is available.A regression model is used in an effort to quantify the impact of increasing transaction costs, in particular taxes, on holding period length in order to determine how changes in legislature affect the market. Finally insights gained from the link between holding periods and investment performance can provide useful guidelines for portfolio managers.Data on sale and purchase dates, transaction costs and individual property performance for several countries is supplied by IPD Investment Property Databank. A preliminary analysis suggests that average holding periods and deviations from the mean differ substantially between countries. The Netherlands seem to have had the longest average holding period with the largest standard deviation. The shortest average holding period could be found in Sweden while France had the smallest deviation of holding periods. Data for the UK is still pending.

Research paper thumbnail of Valuation accuracy across Europe: a mass appraisal approach

Journal of Property Research, 2020

The aim of this paper was to compare valuation accuracy of eight European markets, using the same... more The aim of this paper was to compare valuation accuracy of eight European markets, using the same time period, data source and methodology. The emphasis was placed on the accuracy of held properties because previous studies showed that sold properties tend to be valued closer to the market. Real sales data was used to derive hedonic sale prices. The Heckman correction was employed to correct for sample selection bias. A comparison of simple differences between actual valuations and fitted prices showed that valuations were on average below fitted prices in all countries except the Netherlands, indicating a possible overvaluation problem of held properties in Europe. A comparison of the absolute difference showed that the Netherlands and Switzerland displayed the highest valuation accuracy. Italy and Sweden on the other hand were the markets with the lowest median valuation accuracy and largest spreads of observations. All countries, except Sweden, had a majority of observations within an absolute difference of 20%. The two most interesting conclusions from the analysis were that Germany and Switzerland did not differ significantly from other markets in terms of valuation accuracy and that Sweden was consistently the market with the lowest valuation accuracy.

Research paper thumbnail of Internal Valuations and Valuation Accuracy in Germany

This paper is an analysis of the performance and accuracy of internal and external property valua... more This paper is an analysis of the performance and accuracy of internal and external property valuations in Germany. Potential problems with appraised property values as estimators for true market prices are well documented by theoretical and empirical studies. Many issues, among them client influence and time lacks, are generally believed to be even more pronounced in internal property valuations. A unique dataset of over 4,000 individual properties between 2000 and 2013 is used for the analysis. A simple performance analysis shows that internal valuations follow external valuations with a time lack of approximately one period and that internal valuations react more volatile to market changes than external valuations. The main analysis reveals that over the time period under investigation internal valuations have significantly higher appraised values per square metre than external valuations. In order to assess valuation accuracy real transaction data is used to derive hedonic transa...

Research paper thumbnail of Valuation accuracy of external and internal property valuations in Germany

Journal of Property Research, 2021

ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the c... more ABSTRACT While all valuers are obliged to act impartially and transparently to reduce bias, the closer relationship between valuers and clients among internal valuations may raise additional concerns regarding the independence of the valuer and hence the objectivity of the result. This paper analyses how internal and external valuations differ in their ability to mirror market prices. The dataset for the analyses contained 4,805 commercial properties in Germany between 1995 and 2013. The first part of the analysis was a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties. It showed that a majority of both valuation types had a valuation error within the acceptable threshold of 15% but that external valuations were on average significantly closer to sale prices than internal valuations. Due to sample selection issues, a second analysis, called Actual Valuation and Fitted Sale Price Comparison, was carried out. Real transactions were used to derive hedonic prices that could be compared against valuations of held properties. The Heckman Correction was used to mitigate sample selection bias. The results showed that both valuation types produced a majority of observations within the set threshold but that external valuations were on average closer to sale prices than internal valuations.

Research paper thumbnail of Equivalent Yields and Ex-Post Property Valuations in the UK

Research paper thumbnail of Accuracy of the German income approach in comparison to German DCF valuations

Journal of Property Research, 2020

The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stab... more The traditional German Income Approach (GIA) is often criticised for resulting in smooth and stable estimations of value that do not adequately represent market movements. So far, empirical evidence has been scarce. The first part of the analysis consisted of a direct comparison of actual valuations and sale prices according to GIA and DCF models in Germany. The second part of the analysis used hedonic regressions to derive fitted sale prices that could be compared to valuations of held properties in order to assess valuation accuracy on a larger and more homogenous dataset. The Heckman Correction was used to reduce the impact of sample selection bias. The research hypothesis, that GIA valuations and DCF valuations result in equally accurate proxies for market prices, could not be rejected. Both techniques produced on average a comparable amount of valuations within the selected threshold of 15%. This finding suggests that the underlying valuation technique, at least with respect to DCF and GIA, is not able to explain the observed smoothness of German valuationbased indices. Future research should focus on a country comparison of valuation accuracy in order to put the results of this study into perspective.

Research paper thumbnail of The German way of valuing property: Investigating the difference between discounted cash flow and the German income approach

Proceedings of the 19th Annual European Real Estate Society Conference - Edinburgh, Scotland, 2012

The German property market differs from most of its international counterparts in its comparative... more The German property market differs from most of its international counterparts in its comparatively low but remarkably stable performance over the past decades. One of the possible reasons for this anomaly could be the German appraisal method referred to as the German Income Approach (Ertragswertverfahren) which is often said to result in an even smoother pattern than the internationally applied Discounted Cash Flow technique. Due to an increasing number of German investors using DCF it was possible to assemble a dataset of almost 3,000 individual German office & retail properties from 2005 to 2010 with a sufficiently large proportion of DCF valuations to allow for a meaningful comparison within the same market. In order to establish whether and to what extent GIA valuations differ from DCF valuations two separate hedonic indices are derived. A novelty of the paper is the integration of valuation and transaction data. Market data is used to derive transaction prices for every property over the time period under investigation. This theoretical transaction price is used to approximate the average margin of error for each appraisal technique. The Heckman two-step procedure (Heckman, 1979) is employed in order to correct for possible sample selection bias. The objective of this paper is to offer more insight into the question which appraisal method more accurately predicts transaction prices on the German property market. A preliminary analysis indicates that there are significant differences between valuations following DCF and GIA.

Research paper thumbnail of Comparison of the DCF and German income approach

Journal of Property Investment & Finance, 2019

Purpose The majority of institutional investors in Germany use the German income approach (GIA) w... more Purpose The majority of institutional investors in Germany use the German income approach (GIA) while investors abroad prefer the discounted cash flow (DCF). The debate around the two methods has been largely theoretical, lacking large-scale empirical evidence. The paper aims to discuss this issue. Design/methodology/approach The analysis consisted of a performance comparison and hedonic regressions based on ordinary least squares. Fitted GIA and DCF values were obtained for all observations in the data set in order to eliminate distortions caused by different property characteristics in the two valuation sub-samples. Findings The research hypothesis, stating that the two methods result in statistically identical estimations of value, was rejected. The performance analysis showed that GIA valuations displayed smoother total return performance due to less volatile capital growth in comparison to DCF valuations. Comparing the fitted values obtained from the regressions showed that GIA...

Research paper thumbnail of Property Valuations and Valuation Accuracy in Germany and Europe

Due to the special attributes of real estate as an asset class, property values are not readily o... more Due to the special attributes of real estate as an asset class, property values are not readily observable on the market and therefore the industry depends heavily on valuations to estimate the value of a property at a specific moment in time. The ability of valuations to accurately mirror market values is therefore of vital importance. This collection of papers summarizes the analyses of different aspects of property valuations in Germany that may contribute to the observed stability of German property values in comparison to other countries. The analyses included a Market-Adjusted Valuation and Actual Sale Price Comparison, based on sold properties, and an Actual Valuation and Fitted Sale Price Comparison, based on held properties. The Heckman Correction was used to reduce the impact of sample selection bias in the transaction regressions. The first analysis compared the German Income Approach (GIA) with valuations according to the Discounted Cash Flow (DCF) approach. The results ...