Property valuation in the Nordic countries - KTI

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3.11 Office income returns and yields Income returns in general below valuation yields Source: IPD, KTI 9 Denmark 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income Return (t) Valuation Yield (t-1) Difference 9 Norway 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income Return (t) Valuation Yield (t-1) Difference 9 Finland 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income Return (t) Valuation Yield (t-1) Difference 9 Sweden 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income Return (t) Valuation Yield (t-1) Difference 3.12 Office yields: prime vs secondary 8,0 7,5 Denmark 2,00 1,75 8,0 7,5 Finland 2,00 1,75 7,0 1,50 7,0 1,50 6,5 1,25 6,5 1,25 6,0 1,00 6,0 1,00 5,5 0,75 5,5 0,75 5,0 0,50 5,0 0,50 4,5 0,25 4,5 0,25 4,0 0,00 2007 2008 2009 2010 2011 Copenhagen CBD Copenhagen South & West Yield gap 4,0 2007 2008 2009 2010 2011 Helsinki CBD Rest of Helsinki Yield gap 0,00 8,0 7,5 Norway 2,00 1,75 8,0 7,5 Sweden 2,00 1,75 7,0 1,50 7,0 1,50 6,5 1,25 6,5 1,25 6,0 1,00 6,0 1,00 5,5 0,75 5,5 0,75 5,0 0,50 5,0 0,50 4,5 0,25 4,5 0,25 4,0 2009 2010 2011 0,00 4,0 2007 2008 2009 2010 2011 0,00 Oslo CBD Osto East & South Yield gap Stockholm CBD Greater Stockholm Yield gap Source: IPD, KTI 22 Property valuation in the Nordic countries
4 Comparison between sale prices and valuations IPD has conducted a long series of research studies in co-operation with RICS to investigate how sale prices are related to their previous market valuation. In order to achieve a Nordic overview on this, the sales in the IPD and KTI databases over the last ten years have been analysed. The analysis in this report covers the Nordic countries and addresses two key questions: 1. How much do sale prices differ from previous valuations? 2. Are differences random or were sale prices consistently above or below the latest valuation? The calculation method and the information about the sales analysed are presented in more detail in Appendix 2. The differences between sale prices and valuations are calculated with two methods: average absolute differences and average direction differences. - Average absolute difference: the average difference between an asset’s sale price and its preceding market adjusted valuation regardless of whether the adjusted valuation is above or below the sale price. - Average direction difference: the simple difference between an asset’s sale price and its preceding market adjusted valuation. Analyses are reported on both un-weighted and weighted differences, where the first one is based on number of transactions, and latter also takes the size of the sale price into account. The calculations were made in line with RICS IPD Valuation and Sale Price Reports published for other European countries. It should also be stated that there are some issues related to the reliability of these analyses. First of all the number of transactions is limited after sorting out package sales, internal sales, barter deals, etc. The sample may thus not be representative for the whole market. Also, for obvious reasons, it is only possible to analyse deals that actually happened and one can assume that properties with a higher sale price than the previous market valuation will be overrepresented, as investors are more likely to sell properties where they receive a premium compared to the valuation. In other words, if a higher price than the market value in the most recent valuation is offered, an investor’s incitement to sell is higher than in the opposite, everything else being equal. Also, there might be many kind of terms in the transactions (for example rent guarantees) which may have an impact on the selling prices. All of these circumstances may have impact on the results and conclusions of this analysis. Property valuation in the Nordic countries 23
Page 1 and 2: Property valuation in the Nordic Co
Page 3 and 4: Executive summary The “Property v
Page 5 and 6: 1 Introduction This report summaris
Page 7 and 8: In the first half of 2012, the tran
Page 9 and 10: 3 Property valuations in the Nordic
Page 11 and 12: 3.4 Key findings from the interview
Page 13 and 14: The usage of DCF model for valuatio
Page 15 and 16: In Norway, the consensus was that t
Page 17 and 18: 3.6 Contents in the valuation repor
Page 19 and 20: The most common sources mentioned f
Page 21: The figure also reveals that the yi
Page 25 and 26: 4.2 Sale prices vs market values We
Page 27 and 28: 4.3 The distribution of the differe
Page 29 and 30: 5 Future trends and challenges in t
Page 31 and 32: 5.1 The main future trends and chal
Page 33 and 34: Appendix 2: The calculation methods
Page 35: KTI Finland is an independent resea

Property valuation in the Nordic countries - KTI

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