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Complex Land Valuation in current times

Complex Land Valuation in current times. Short review of the methods. Contents. Comparison Approach Overview Data Pros & Cons Sources of uncertainty Residual Method Overview Data Pros & Cons Sources of uncertainty Case study of complex valuation Comparison Approach Available D ata

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Complex Land Valuation in current times

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  1. Complex Land Valuation in current times Short review of the methods

  2. Contents Comparison Approach Overview Data Pros & Cons Sources of uncertainty Residual Method Overview Data Pros & Cons Sources of uncertainty Case study of complex valuation Comparison Approach Available Data Comparison Approach Outcome Residual Method Data Residual Method Outcome Conclusions

  3. Comparison Approach Is applicable for similar properties Requires a functional market with data availability Using adjustments to determine value Data used: Transactions with similar properties Property listings Market information (micro & macro economics) Property specific data Valuer’s experience

  4. Comparison Approach (3) Sources of Uncertainty subjectivity in estimating adjustments (location, physical features, etc) incomplete/ wrong information adjustments for non straight-forward features (development potential)

  5. Residual Method Is applicable for complex properties Multidisciplinary Complex and requiring extensive experience Data used: Transactions with end-product properties Construction market, Financing market, Consultancy market data Market information (micro & macro economics) Property specific data Valuer’s experience

  6. Residual Method (3) Sources of Uncertainty Development specific information (profit rate, financing rate, etc.) Sensitivity to quick market movements Future projection

  7. Case Study – Semi central development land plot

  8. Difference in approach could lead to deal-breaking situations • Residual method indicates the maximum achievable values if extremes values are used, otherwise indicates averages • Lender will always look into the pragmatic side of facts, developer will target best deal • A decision should be made looking carefully into both outcomes • Lenders/ Valuers should be aware of the pros and cons of each method before considering any of them • Land value reflects its potential, not the physical existence/ features • The potential of the land plot is not always properly revealed using direct comparison • The residual approach does not forecast the take up of the project, it is an assumption Conclusions

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