Property Investment Theory

BOOK COVER......Page 1
HALF-TITLE......Page 2
TITLE......Page 3
COPYRIGHT......Page 4
CONTENTS......Page 5
NOTES ON AUTHORS......Page 7
ACKNOWLEDGEMENTS......Page 9
INTRODUCTION......Page 11
1 Property and Investment in the UK......Page 15
2 The History of Property Investment in the UK......Page 16
1973–74: the crash......Page 17
1974–82: the expansion of institutional investment......Page 18
1983–87: the maturing of the property investment market......Page 19
1987 and beyond; the crash of ‘87 and the future......Page 22
3 The Property Market and Property Investment Theory......Page 24
REFERENCES......Page 26
1 Hatching Method with Motive......Page 28
2 Valuation for Investment Appraisal......Page 29
3 Models for Market Valuation......Page 30
4 The Practical Flaw of the DCF Method......Page 32
5 The Valuation of Standard Freeholds......Page 33
6 The Valuation of Non-Standard Investments......Page 35
7 Conclusion......Page 36
References......Page 37
2 Discounted cash flow models......Page 38
Rack rented freehold investments......Page 39
Reversionary freehold investments......Page 40
Leasehold investments......Page 41
Notes......Page 42
The discount rate......Page 43
Valuation of freehold reversions......Page 44
Sensitivity of capital values of reversions......Page 46
The implied growth rate......Page 47
Freehold reversion......Page 48
Holding period of the investment......Page 50
4 Conclusions......Page 52
Appendix 1......Page 53
Appendix 2 Sensitivity Analysis......Page 55
Leaseholds......Page 56
Appendix 3......Page 57
Appendix 4......Page 59
Implicit and explicit appraisal models......Page 61
Concepts of depreciation......Page 62
Sources of depreciation......Page 63
The impact of depreciation......Page 64
A theoretical approach......Page 66
Explicit empirical models......Page 68
Expenditure......Page 70
The City University research: the City office market......Page 71
A third variable......Page 73
A basic model......Page 74
The effect of upward-only rent reviews......Page 75
The input variables......Page 76
The appraisal model illustrated: an example......Page 77
References......Page 80
1 Introduction......Page 82
2 Aspects of Risk in Property Investment......Page 83
Yield on sale and timing of sale......Page 84
Liquidity, management costs, taxation and inflation......Page 85
3 The Market Approach to Risk Analysis......Page 86
Conventional Value in 1985......Page 87
Simplified DCF Appraisal 1985......Page 88
Scenarios......Page 90
Risk adjusted discount rate (RADR)......Page 91
Risk free discount rate (RFDR)......Page 92
Sliced income approach......Page 93
Hillier Method......Page 95
Notes......Page 97
Rental Value in Year 5:......Page 99
Monte Carlo simulation......Page 103
References......Page 108
1 Forecasting Property Values......Page 110
2 Market and Portfolio Variables......Page 111
3 Supply and Demand......Page 112
4 Forecasting Rental Values......Page 115
5 Yields......Page 119
6 Yield Trends and Interest Rates......Page 120
7 Investment in Property......Page 121
8 Conclusion......Page 123
1 Introduction......Page 124
PART 1......Page 125
PART 2......Page 127
PART 3......Page 132
XYZ PORTFOLIO SUMMARY (1984–85)......Page 138
ANALYSIS OF ABNORMAL RETURN......Page 139
ANALYSIS OF DIVERSIFICATION......Page 140
Analysis Period 1984–85......Page 142
Diversification......Page 143
Performance of Sectors......Page 145
Portfolio strategy......Page 146
1 Introduction......Page 148
2 What does Property offer the Long Term Investor?......Page 149
3 Estimation of Duration......Page 151
4 How does Duration explain Behaviour?......Page 154
5 How Risky is Property as a Long Term Investment?......Page 155
6 Conclusion......Page 157
References......Page 158
2 The Issues......Page 160
3 Valuation and Investment Appraisal......Page 161
4 Depreciation......Page 162
5 Forecasting......Page 163
6 Risk Analysis......Page 164
7 Portfolio Theory and Property Investment Analysis......Page 165
8 Property as a long term investment—the contribution of duration......Page 166
9 Research—some pointers......Page 167
References......Page 168
APPENDIX ADVANCES IN PROPERTY INVESTMENT THEORY......Page 170
Symbolic Dictionary......Page 172
INDEX......Page 173