The Determinants of Appraisal-Based Capitalization Rates
- Topics:
- Market Studies
- Tags:
- Appraisal,
- Capitalization Rate,
- CB Richard Ellis,
- Currency & Foreign Exchange,
- Finance,
- Financial Services,
- Operational Accounting
- Source:
- CB Richard Ellis
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Overview: The article asserts that in traded securities markets, the single most revealing statistic about how an asset is viewed is the ratio of price to earnings (PE). Higher PE’s signal greater expected growth and less uncertainty, while lower PE’s imply the reverse. The findings of this paper point to three major conclusions. First, capitalization rate levels exhibit persistent differences across markets as a result of variations in fixed market characteristics that influence investor perceptions of risk and/or income growth expectations. Second, movements in market-specific capitalization rates strongly incorporate components that are shaped by the behavior of the local market and, more specifically, by the time path of rental growth and rent levels relative to their historical averages. Third, movements in market-specific capitalization rates also incorporate common national influences: from the capital market in the form of interest rates and from the economy in the form of expected general price inflation.
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Format: PDF | Size: 273KB | Date: Mar 2001 | Pages: 27
