A new paradigm for real estate valuation?

Abstract

PurposeThe purpose of this exploratory paper is to examine the efficient market theories and to argue that a new paradigm or an expanded paradigm is needed for the valuation of real estate. This may actually not be a new paradigm but it may be necessary to go back in time to make the valuation models that are used more realistic and to try to include the realities that there are many diverse actors in the real estate marketplace and their actions are important and should not be assumed away. Behavior matters and the models for pricing real estate need to take this into account.Design/methodology/approachThe paper examines some of the emerging models in other disciplines and works to relate them to the real estate marketplace in general but, more importantly, to help to explain the most recent bust of the global real estate markets.FindingsThe paper finds that there is a need to consider an alternative paradigm for the valuation of real estate and complexity theory as well as the adaptive system models that specifically take into account that the various actors in a real estate marketplace could be used to help better explain the emergent nature of real estate values.Originality/valueThis is the first paper to one's knowledge that argues for a shift in thinking to include complexity economics and agent‐based modeling as potential solutions to gain a better understanding of how real estate markets react.

Land and building separation based on Shapley values

“…These correlations are used as initial values in a Gaussian function that generates capacities of attributes under logical conditions, Shapley's axioms and Sugeno's criteria of nonlinear monotonic increase of contributions (Grabisch and Raufaste, 2008). The choice of that function rests on several arguments; notably, it is known that real estate price formation usually obeys a Gaussian law of behavior (Wyman et al, 2011), responding adequately to the criteria of Sugeno (1974) in building the fuzzy measures of capacities. The total capacity in the Gauss integral is assumed to cover well the functional behavior of decisions on the probable value of combinations, contributing to a more decrease in bias factor.…”

Research bias in judgement bias studies – a systematic review of valuation judgement literature

“…As a starting point, we examined theoretical papers on real estate (valuation) behaviour research as provided by DeLisle (1985), Diaz (1999), Diaz and Hansz (2007) and Wyman et al (2011) to identify relevant papers on valuer judgement behaviour. Analogue to the technique of snowball sampling (Verschuren & Doorewaard, 2015) we applied author citation search to assemble other relevant studies in this area.…”

“…However, little is known on the emphasis of the research undertaken. Although Diaz (1999) Diaz and Hansz (2007) and Wyman, Seldin, and Worzala (2011) have provided partial overviews of behavioural studies and the behavioural paradigm in valuation, to our knowledge no systematic review of empirical studies on valuer judgement behaviour has been conducted over the last 30 years.…”

The Specificity of the Investment in Land as in Real Estate

“…The current trends of land grabbing call for the need to comprehensively research land investment expediency, trends. Although scientific literature is rich in the studies to focus on the issues of real estate development (the development of international and local real estate markets was analysed by Wyman, Seldin, and Worzala (2011), Tiwari and White (2014), Hin, Ho, and Addae-Dapaah (2014), Faulkner (2016), Dong and Sing (2017), etc. ; the dynamics of the investment in real estate were studied by Gholipour Fereidouni and Masron (2013), Patterson (2013), French (2015), etc.…”