Appraisal Data Base and Information Systems by Stephen Foster and Stanley W. Hamilton (Canada)

Synopsis

The expanding use of computers and computerised databases by appraisers, especially those involved in mass appraisals for real property tax purposes, has presented both new challenges and new opportunities. The increasing power of microcomputers, coupled with reduced prices for hardware and software, has placed computer facilities within the reach of even the smallest appraisal office. The cost effective computer capacity, combined with more readily available electronic databases, is changing the appraisal profession.

This paper presents a case study of one organisation (the British Columbia Assessment Authority or BCAA) that has been a leader in the development of comprehensive data systems for use in mass appraisal, and uses this to illustrate a considered approach to addressing the issues. The paper begins by describing BCAA and relates its mandate to the more general role of valuations. This is followed by an analysis of the types of data typically required by appraisers and how these are assembled and managed by BCAA. A review of the types of analyses typically undertaken by appraisers, and specifically how this is done by BCAA is presented. Examples of the types of programs developed by BCAA are discussed. These programs integrate the typical valuation process with the requirements to manage and organise mass data files.

Synopsis

Over the last decade, several attempts have been made to measure real estate using techniques patterned after stock and bond measures. The development and construction of these real estate measures were based upon the assumption that institutional investors would need to have accurate and reliable information on the performance of real estate. This performance information would then be used to answer such questions as: "What proportion of funds should be allocated to property?" and "What have been the historical risk and return characteristics of real estate compared with those of stocks, bonds and inflation?" In many instances, lack of experience and understanding in working with real estate performance measures has led to poorly formulated answers to these questions and related issues.

This paper presents the methodology for designing, creating and maintaining a performance index of properties held in institutional portfolios. The experience of developing the Russell Canadian Property Index (RCPI) will be used to illustrate the techniques and challenges of creating a benchmark that can be used for asset allocation and performance measurement purposes.

Synopsis

This paper examines the origins, objectives and achievements of The European Group of Valuers of Fixed Assets (TEGOVOFA), discussing the principles and contents of the European Guidance Notes on the Valuation of Fixed Assets.

In this context, the effect of the 1992 Delors programme on the requirement for asset valuation standards is discussed, as is the liberalisation of Eastern Europe and its potential impact on the development of common standards.

Synopsis

This paper considers the problems which have arisen in recent years from the many definitions of "market value" which occur in various parts of the world. There is a need for a common language and the avoidance of terms which tend to confuse the issues involved rather than clarify them. The concept of forced sale is also dealt with in the paper and there is reference throughout to The International Asset Valuation Standards Committee (TIAVSC).

Synopsis

In the United States of America in the 1980s, boom property markets coupled with the deregulation of loan procedures on real estate led to a massive influx of money into property development and investment via savings and loan companies. All such loans, under US legislation, were guaranteed by the Government and the boom conditions meant that 100 per cent loans were often granted on the properties. When the market slumped, a large number of developers abandoned properties as values fell well below the worth of the loans secured on them and the Government had an obligation to honour these loans as numerous savings and loan companies went into liquidation.

This paper traces the events that led up to this crisis and in particular, discusses the role that the property appraiser played in the process.

Synopsis (workshop)

Real estate should have its weighting in portfolios based on formal analysis. One possible approach is efficient sets derived in a mean variance framework. For this purpose this paper will first look at the risk/return characteristics of real estate; on the basis of appraisal values. Based on these estimates and on the readily available characteristics of bonds and equities, efficient portfolios will be derived.

One frequently quoted reason to include real estate in portfolios of pension funds is their assumed characteristic as a hedge against inflation. This property will be further examined. Inflation will then be added as a dimension to the analysis. Based on the analysis, a number of observations will be made about the role of real estate in efficient investment portfolios.