Valuing the land component of improved investment property

Terry Boyd; Steven Boyd

doi:10.1108/14635781211241752

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Valuing the land component of improved investment property

Journal article

Open access

Peer reviewed

Valuing the land component of improved investment property

Terry Boyd and Steven Boyd

Journal of Property Investment & Finance, Vol.30(4), pp.338-353

2012

DOI: https://doi.org/10.1108/14635781211241752

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Abstract

depreciated replacement cost

productivity

mass appraisal

residual method

value benchmarks

Australia

property

market value

Purpose - Many taxing authorities use unimproved land (site) values as a tax base. In highly developed urban areas this may require the use of indirect valuation methods, such as an extraction technique to arrive at the land value. The purpose of this paper is to propose that the land extraction (residual) valuation calculation of an investment property should incorporate productivity variables, rather than cost based figures, in order to simulate market value principles. Design/methodology/approach - This paper examines the assessment of the land component of investment property as an ad valorem tax base. It justifies a valuation methodology using the market comparison approach before developing a model to meet specified criteria. The model incorporates productivity based benchmarks and differentials appropriate for shopping centre properties. The model is then tested on an Australian shopping centre. Findings - This paper found that the land value component of a major shopping centre in Australia could be derived from comparable vacant and improved sales using the variables of moving annual turnover (MAT) and gross lettable area (GLA) as key value determinants. Research limitations/implications - This exploratory research identified a model that is appropriate for major shopping centres in Queensland, Australia. The model could form the framework for other types of investment property but the key productivity determinants would require re-examination. Practical implications - This study provides a practical solution to an ongoing valuation problem arising from the rating legislation in Australia, which requires the determination of site value for all property types. Originality/value - This paper uses productivity variables to assess the site value of investment property. This innovative methodology can provide a more accurate appraisal of site values.

Details

Title: Valuing the land component of improved investment property
Authors: Terry Boyd (Author) - University of the Sunshine Coast - Faculty of Arts and Business
Steven Boyd (Author) - University of the Sunshine Coast - Faculty of Arts and Business
Publication details: Journal of Property Investment & Finance, Vol.30(4), pp.338-353
Publisher: Emerald Group Publishing Ltd.
Date published: 2012
DOI: 10.1108/14635781211241752
ISSN: 1463-578X
Copyright note: Copyright © 2012 Emerald Group Publishing Limited. This article is © Emerald Group Publishing and permission has been granted for this version to appear here. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
Organisation Unit: University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99450401102621
Output Type: Journal article

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Collaboration types: Domestic collaboration
Web Of Science research areas: Business, Finance

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