Transcript Slide 1

A SHORT HISTORY OF PROPERTY VALUATION MODELS
— THE 17TH TO 21ST CENTURY
Prepared for presentation at the
European Real Estate Society Conference,
Stockholm, Sweden,
27 June 2009
Rodney L Jefferies
Agricultural Management and Property Studies Department,
Commerce Faculty, Lincoln University, Canterbury, New Zealand
P.O. Box 84, Lincoln University, Lincoln 7647, New Zealand
1
Overview of Paper
• The aim of this paper is to set in context of a history — necessarily short to fit in the
scope of a conference paper — concentrating on describing and examining the
development of investment valuation models — not the theory beyond that necessary to
explain the models in their historical context.
• It does deal with methodology — but only to the extent as to how the models fit
within the broader investment valuation paradigms of their day and professional
generation.
• This paper, based on the author’s PhD current research literature review, omits any
equations and examples of the models referred to. The citations and references refer the
reader to relevant sources for such details and elaborations by the originators of the
models. (A Doctoral proposal was presented at this ERES Conference Doctoral Session
1.5 – A generic property interest real value investment valuation model).
• Accompanying this paper is a colour chart [Following] setting out the key
contributions to income valuation models historically over the last four centuries in
chronological order by decades within each highlighted century, beginning in 1600 to the
present time.
• This shows the contributions of the various authors stratified into those from the UK,
USA, and Australia/New Zealand with a brief identification of their key publications or
contributions.
• It highlights the historical developments in income valuation models set
longitudinally against the different technologies available to valuers applying these
models in practice.
Sections in Paper
 Introduction
 History of income valuation thought, concepts, professional practice and
standards
 Historical development of investment valuation models
 Investment versus market value
 Firstly, UK property investment valuation models
 History of models and valuation tables in 16th–18th Century
 Equated yield models
 UK rational or logical valuation models
 Real value models
 RICS Research report into valuation methods
 UK Professional response and EY endorsement
 Real Value Hybrid Model
 Discounted cash flow “models” in the UK
 Advanced explicit DCF, arbitrage , split tenant-risk/market risk rate , actuarial,
convertible bond and real options models
 Inter-country comparisons
Clay’s 17th Century Valuation Model
Based on 30 years purchase @ 3.33% p.a.
4
Sections in Paper Continued
 Secondly, USA investment real estate appraisal models






Capitalization models in the USA – 1930-1960s
Split-capitalization models
Band of investment models
Ellwood’s mortgage-equity model
Discounted cash flow (DCF) models in USA
Blackadar’s dynamic capitalization model
 Thirdly, Australia & New Zealand
 Synthesis of traditional and other models from UK & USA
 Australian & New Zealand adaptations of DCFs from overseas
models
 DCF model development & standards in Australia & New Zealand
 Jefferies’ generic real value model
Influence of technology on progress
Author's slide rule from the 1960's
Odhner Mechanical Calculator circa
1935-45 as used by Author in Dunedin
in 1964
6
Sections in Paper Continued

Fourthly, The parallel influence of technology
• This first technological advance arose from the printing press – mass
produced ready-reckoners, almanacs and valuation and interest tables from
the early 17th Century
• Next advance was the introduction of slide rules in 18th — 20th Century
• Next was mechanical calculators — invented in 1822 used to 1960s
• Next was electronic calculators — invented in 1957 used to present
• Next was electronic computers — invented in 1960s used to present
• Application of models to multi-tenanted properties
• The lag in textbook coverage
• “Long live” direct capitalisation!
– Progress is inevitable however!
• Valediction
– This author would propose a real value model for real estate valuation
– but “he’d have to say that” – wouldn’t he?
• The time-charts Follow:
Technology becomes – electronic
& then small and portable
Vintage Sharp Compet 364R Calculator
As used by Author ex 1973 & still on his desk
Vintage Compaq Portable II -1986
As used by Author 1986-1995
8
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
1620
1630 1640 1650
1660
1670 1680 1690 1700 1710
1720
1800
1810
1820 1830 1840 1850 1860
1870
1880 1890
1900
1910
1930
1991 - Douglas Scarrett
1994 - RICS
1995 - Gerald Brown
1995 - Alastair Adair et al
1995 - Andrew Baum and
Neil Crosby
1995 - Nick French and
Charles Ward
1996 - Andrew Adams
and Philip Booth
2000 - David Isaac and
Terry Steley
2000 - Tony Johnson et al
2002 - Tim Harvard
2002 & 2008 - Alick
Davidson
2006 - Andrew Baum et al
2006 - Sarah Sayce et al
2007 - Peter Wyatt
2008 - Andrew Baum and
Neil Crosby
2008 - Douglas Scarrett
1980
1990
2000
Kenneth Lusht - 2000
Karl-Verner Schulte - 2001
Dominick Fischer - 2002
Charles Akerson - 2000 & 2009
Tom Whipple - 2006
Appraisal Institute - 2001 & 2008
Richard Reed - 2007
Jeffrey Fisher and Robert Martin 2005 & 2008
1970
Appleby and Westwood 1991
Baillieu Knight Frank - 1992
Jefferies - 1990
Patrick Rowland - 1993
AIVLE - 1993.
Tom Whipple - 1995
Rodney Jefferies - 1995
NZIV - 1995
Rodney Jefferies - 1996/7
AIVLE - 1997
MechanIcal Calculators
Jeffrey Fisher and
Robert Martin -1991
Ken Lusht - 1996
1960
James Mason - 1982
Gordon Blackadar -1981/83
Computers
1980/82 - Stephen Sykes
1980/86 - Andrew Trott
1985 - Neil Crosby
1972 - Michael Greaves
1973 - Ernest Wood
1975/76 Philip Marshall
1976 - Jack Rose
1976 - Greenwell W. & Co.
1978 - Philip Bowcock
1978 - Alick Davidson
1950
Charles Akerson - 1970
William Kinnard Jnr - 1971
Graaskamp - 1971
Irvin Johnson - 1972
Lincoln North - 1973
Jeffrey Fisher - 1979
1940
James Graaskamp - 1969
S l i d e R u l e s
Richard Ratcliff - 1949
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
Appraisal Institute - 1951
Arthur Weimer - 1953
Leon Ellwood - 1959
1920
Irving Fisher - 1930
Ivan Thornson - 1932
Frederick Babcock - 1932
Phillip Kniskern - 1933
Ivan Thorson - 1936
Thurston Ross - 1937
1910 - Clarence &
Norman Webb
1913 - Richard Parry
MechanIcal Calculators
Frederick Babcock - 1924
Arthur Mertzke - 1927
John Grimes &
William Craigue - 1928
1877 - Henry Hoskold
1867 - Karl Marx
1848 - John Stuart Mill
1730 1740 1750 1760 1770 1780 1790
1811 - William Inwood
1815 - Robert Malthus
1817 - David Ricardo
Side Rules
1802 - Francis Baily
Ready-Reckoners
& Interest Tables
1726 - John Smart
1776 - Adam Smith
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
Calculators
Mobil Oil N.Z. Ltd. - 1968
Squire Speedy - 1968
USA Land
Economists &
Valuation Model
Contributors
John Murray - 1949
Century/Decade 1600 1610
Richard Hurd - 1903
Irving Fisher - 1906
UK Land
Economists &
Valuation Model
Contributors
Electronic Calculators
Computers
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
Isaac and Terry Steley publish "Property Valuation
Techniques"
Tony Johnson et al publish "Modern Methods of
Valuation - 9th Ed"
Kenneth Lusht publishes "Real Estate Valuation Principles and Applications"
Akerson publishes AI's "Capitalisation Theory and
Techniques: Study Guide"
Schulte publishes "Real Estate Education Throughout
The World: Past, Present and Future"
Fischer publishes "Property Valuation Methodology"
Harvard publishes "Investment Property Valuation Today"
Davidson publishes 12th & 13th Edns of "Parry's
Valuation & Investment Tables"
AI publish 12th & 13th Edns of "The Appraisal of Real
Estate"
Fisher and Martin publish 2nd & 3rd Edns of "Income
Property Valuation"
Andrew Baum et al publish 4th Ed of "The Income
Approach to Property Valuation"
Sarah Sayce et al publish "Real Estate Appraisal: From
Value to Worth"
Whipple publishes 2nd Edn of "Property valuation and
analysis"
Reed edits "The valuation of real estate – the Australian
edition of the Appraisal of Real Estate – 12th Edn"
Wyatt publishes "Property valuation in an economic
context"
Baum and Crosby publish 3rd Edn of "Property
Investment Appraisal"
Scarrett publishes 2nd Edn of "Property Valuation: The
Fisher and Martin publish "Income Property Appraisal"
Appleby & Westwood publish "The Australian Valuation
and Life Annuity Tables"
Scarrett publishes "Property Valuation: The five
methods"
Brown proposed a "Split tenant-risk/market risk rate
model"
Alastair Adair et al publish "European Valuation
Practice: Theory and Technique"
Baum and Crosby publish "Property Investment
Appraisal"
French & Ward proposed an "Arbitrage model"
Jefferies published "Urban Valuation in New Zealand Vol. II"
Rowland publishes "Property Investments and Their
Financing"
Baillieu Knight Frank - organised the "Property
Economic Task Force"
AIVLE issue "Information Paper on Use of Discounted
Cash Flow in Property Valuations"
RICS - issues "The Mallinson Report - The President’s
Working Party on Commercial Property Valuations"
Whipple publishes "Property valuation and analysis"
Jefferies NZIV monograph "Discounted cash flow (DCF)
valuation techniques & spreadsheet applications"
NZIV issue "Guidance Note 4: Use of Discounted Cash
Flow Techniques in Property Valuations."
Lusht publishes "Real Estate Valuation"
Andrew & Booth proposed an "Actuarial and a
convertible bond model"
Sykes proposes a "Rational valuation model"
Trott chaired "RICS Research project into property
valuation methods"
Blackadar developed a “dynamic capitalization” model
Mason produced "American Institute of Real Estate
Appraisers Financial Tables"
Crosby advocates a "hybrid equated yield and real value
(short-cut DCF) model"
Appraisal Institute starts "The Appraisal of Real Estate"
Weimer advocated "capitalization as only valid method"
Ellwood created mortgage-equity method and published
"Tables for Real Estate Appraising and
Financing"
Mobil Oil N.Z. Ltd. Publishes "DCF Investment Analysis"
Speedy advocates "Investment by DCF methods."
Graaskamp promoted a practical computer service for
the income approach.
Graaskamp driving force behind EDUCARE courses at
Wisconsin University
Akerson developed "Ellwood Without Algebra method"
Kinnard publishes "Income Property Valuation"
Johnson published "The Instant Mortgage-Equity
Technique"
Greaves accredited with “... catalysed the gradual
adoption of the DCF method of valuation in the UK"
Wood advocates a "real value valuation method"
North publishes "Real estate investment analysis and
valuation"
Marshall created "equated yield" model also producing
the initial tables & "Donaldson's Investment Tables"
(1979)
Rose publishes "Rose’s Property Valuation Tables"
Greenwell W. &. Co called for a "New valuation method"
Bowcock publishes "Property Valuation Tables"
Davidson published "Parry's Valuation and Investment
Tables" 10th Edition
Fisher - refined Ellwood’s J-Factors for straight-line or
Ratcliff wrote "Urban Land Econmics"
John Murray wrote "Principles and Practice of Valuation"
Fisher wrote "Theory of Interest ".
Thornson denounced "Annuitists" advocating Hoskold.
Babcock advocated "Split capitalization rates" in "The
Appraisal of Real Estate".
Kniskern advocated a "Single capitalization rate" .
Thornson - advocated "Split-rate capitalization method"
with sinking fund added to the capitalization rate
Ross originated "Band-of-investment" method.
Babcock wrote "The Appraisal of Real Estate".
Mertzke advocated a "built-up capitalization rate".
Grimes & Craigue advocated a "three-interest-rate".
the valuation of land and buildings etc. for various purposes"which
capitalised nett annaul income at a number of years purchase.
Parry published "Parry’s Valuation and Investment Tables "
Hurd defined urban value as economic rent or ground
rent capitalized.
Fisher reputedly coined the term "rate of capitalization"
& the theory of valuing income-producing capital.
Webbs published "Valuation of Real Property: A guide to
Hoskold published "Enginer's Valuing Assistant"
reputedly created a capitalization rate @ speculative rate
+ sinking fund @ safe rate
Marx published "Das Kapital"
Mills published "Elements of political economy"
Inwood's "Tables for the Purchasing of Estates" - one of
the most famous - used into the 20th Century
Malthus published "An inquiry into the progress of rent"
Ricardo published "On the principles of political
economy"
derivations of compound interest formulas
Baily wrote "Tables for the purchasing and renewing of
leases" , consolidating earlier writers and giving mathematical
Smart published "Tables of Interest, Discount Annuites
&c.
Smith published "Wealth of Nations"- incl. theory of rent
as function of price.
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
Rents Foreborne, also for the Valuation of Leases, Annuities and
Purchases either in Present or in Reversion ".
Clay wrote "Easy, and Necessary Tables of Interest and
NOTES:
Key contributions
to land ecomomics
and income
valuation models
1617 - Thomas Clay
17th – 21st Century – Development of Income Valuation Models
Chronological Overview
Electronic Calculators
Computers
S l i d e R u l e s
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
Don’t worry its too small - overall view - see next slide for 17th Century only!
2010 2020
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
1620
1630 1640 1650
1660
1670 1680 1690 1700 1710
1720
1800
1810
1820 1830 1840 1850 1860
1870
1910 - Clarence &
Norman Webb
1913 - Richard Parry
1877 - Henry Hoskold
1867 - Karl Marx
1848 - John Stuart Mill
1730 1740 1750 1760 1770 1780 1790
1811 - William Inwood
1815 - Robert Malthus
1817 - David Ricardo
Side Rules
1802 - Francis Baily
Ready-Reckoners
& Interest Tables
1726 - John Smart
1776 - Adam Smith
MechanIcal Calculators
1880 1890
1900
1910
Frederick Babcock - 1924
Arthur Mertzke - 1927
John Grimes &
William Craigue - 1928
Century/Decade 1600 1610
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
Calculators
Richard Hurd - 1903
Irving Fisher - 1906
UK Land
Economists &
Valuation Model
Contributors
S l i d e R u l e s
Fisher wrote "Theory of Interest ".
Babcock wrote "The Appraisal of Real Estate".
Mertzke advocated a "built-up capitalization rate".
Grimes & Craigue advocated a "three-interest-rate".
the valuation of land and buildings etc. for various purposes"which
capitalised nett annaul income at a number of years purchase.
Parry published "Parry’s Valuation and Investment Tables "
Hurd defined urban value as economic rent or ground
rent capitalized.
Fisher reputedly coined the term "rate of capitalization"
& the theory of valuing income-producing capital.
Webbs published "Valuation of Real Property: A guide to
Hoskold published "Enginer's Valuing Assistant"
reputedly created a capitalization rate @ speculative rate
+ sinking fund @ safe rate
Marx published "Das Kapital"
Mills published "Elements of political economy"
Inwood's "Tables for the Purchasing of Estates" - one of
the most famous - used into the 20th Century
Malthus published "An inquiry into the progress of rent"
Ricardo published "On the principles of political
economy"
derivations of compound interest formulas
Baily wrote "Tables for the purchasing and renewing of
leases" , consolidating earlier writers and giving mathematical
Smart published "Tables of Interest, Discount Annuites
&c.
Smith published "Wealth of Nations"- incl. theory of rent
as function of price.
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
Rents Foreborne, also for the Valuation of Leases, Annuities and
Purchases either in Present or in Reversion ".
Clay wrote "Easy, and Necessary Tables of Interest and
NOTES:
Key contributions
to land ecomomics
and income
valuation models
1617 - Thomas Clay
17th - 19th Century – Development of Income Valuation Models - Chronological Overview
Computers
MechanIcal
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
S l i
1920
Chronological Overview – 17th Century
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Computers
Calculators
Side Rules
Ready-Reckoners
& Interest Tables
UK Land
Economists &
Valuation Model
Contributors
Century/Decade 1600 1610
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
1620
Clay wrote "Easy, and Necessary Tables of Interest and
1617 - Thomas Clay
Rents Foreborne, also for the Valuation of Leases, Annuities and
Purchases either in Present or in Reversion ".
1630 1640 1650
1660
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
1720
1730 1740 1750
R e a d y - R e c k o n e r s &
1670 1680 1690 1700 1710
1726 - John Smart
1776 - Adam Smith
Smart published "Tables of Interest, Discount Annuites
&c.
Smith published "Wealth of Nations"- incl. theory of rent
as function of price.
12
Purchases either in Present or in Reversion ".
1630 1640 1650
Chronological Overview – 18th Century
NOTES:
Key contributions
to land ecomomics
and income
valuation models
1848 - John Stuart Mill
Computers
1776 - Adam Smith
as function of price.
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
Baily wrote "Tables for the purchasing and renewing of
leases" , consolidating earlier writers and giving mathematical
derivations of compound interest formulas
MechanIcal C
1811 - William Inwood
1815 - Robert Malthus
1817 -- John
DavidSmart
Ricardo
1726
Smartwrote
published
of Interest,
Discount
Annuites
Clay
and
and Necessary
"Easy,"Tables
Tables
of Interest
&c. Foreborne, also for the Valuation of Leases, Annuities and
Rents
Purchases
either in Present
or of
in Reversion
Smith published
"Wealth
Nations"-".incl. theory of rent
S l i d e R u l e s
1802 - Francis Baily
Calculators
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
Side Rules
1617
Clay
1726 - Thomas
John Smart
1776 - Adam Smith
Ready-Reckoners
e -s R e c k o n e r s &
R e a d y - R e c k o n e r s & I n t e r e s t RT ea ab dl y
& Interest Tables
UK Land
Economists &
Valuation Model
Contributors
18
18401750
18301740
1810 172018201730
179016901800
17801680
1750 1760
1740
1730
1720 1630
1710 1620
1700 1610
1670 1680 1690 1600
1660 Century/Decade
1640
1650
1660 17701670
1700 1710
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
Inwood's "Tables for the Purchasing of Estates" - one of
the most famous - used into the 20th Century
Malthus
published
"An inquiry
into the
progress
of rent"
Smart
published
of Interest,
"Tables
Discount
Annuites
Ricardo published "On the principles of political
&c.
economy"
Smith
published "Wealth of Nations"- incl. theory of rent
as function of price.
Mills published "Elements of political economy"
1720
- R e c k o n e r s & I n t e r e s t T a b l e s
1710
1726 - John Smart
1776 - Adam Smith
Smart published "Tables of Interest, Discount Annuites
&c.
Smith published "Wealth of Nations"- incl. theory of rent
as function of price.
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Computers
derivations of compound interest formulas
Inwood's "Tables for the Purchasing of Estates" - one of
Claymost
wrote
"Easy,- and
Tables
of Interest and
the
famous
usedNecessary
into the 20th
Century
Rents Foreborne,
also for
theinquiry
Valuation
of Leases,
Annuities
Malthus
published
"An
into
the progress
ofand
rent"
Purchasespublished
either in Present
in principles
Reversion ".of political
Ricardo
"On or
the
economy"
Mills published "Elements of political economy"
Petty developed capitalisation using "years purchase".
Newton established theorems of compound interest
Phillips published "Compound interest & annuity" & misc
tables for reconstruction after the 1666 Fire of London
Marx published "Das Kapital"
Hoskold published "Enginer's Valuing Assistant"
reputedly created a capitalization rate @ speculative rate
+ sinking fund @ safe rate
Hurd defined urban value as economic rent or ground
rent
capitalized.
Smart
published "Tables of Interest, Discount Annuites
Fisher
reputedly coined the term "rate of capitalization"
&c.
& the theory of valuing income-producing capital.
Smith published "Wealth of Nations"- incl. theory of rent
Webbs
"Valuation of Real Property: A guide to
published
as function
of price.
Mec
1730 17
1910
1726 - John Smart
1776 - Adam Smith
1910 - Clarence &
Norman Webb
1913 - Richard Parry
Baily wrote "Tables for the purchasing and renewing of
leases" , consolidating earlier writers and giving mathematical
MechanIcal Calculators
1877 - Henry Hoskold
Calculators
1848 - John Stuart Mill
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
1867 - Karl Marx
R e a d y - R e c k o n e r
1680 1690
16701870
1660 1860
1650
1640
1620
1890171019001720
18801700
1840 1850
1830
1820
1810 1630
1811 - William Inwood
1617 -- Robert
ThomasMalthus
Clay
1815
1817 - David Ricardo
Rules
Side S
l i d e R u l e s
1802 - Francis Baily
Ready-Reckoners
& Interest Tables
UK Land
Economists &
Valuation Model
Contributors
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
Richard Hurd - 1903
Irving Fisher - 1906
1610
Century/Decade
1800
1770 1780 17901600
1730 1740 1750 1760
Chronological Overview – 19th Century
the valuation of land and buildings etc. for various purposes"which
capitalised nett annaul income at a number of years purchase.
Parry published "Parry’s Valuation and Investment Tables "
ors
c h a n I c a l C a l c u l a tCalculators
1610
1600 1900
1870 1880 1890
1820 1830 1840 1850 1860 Century/Decade
Chronological Overview – Early to Mid 20th Century
Mills published "Elements of political economy"
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Marx published "Das Kapital"
Computers
1726 - John Smart
1776 - Adam Smith
MechanIcal Calculators
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
S l i d e R u l e s
James Graaskamp - 1969
1730 1740 1750
1720 1960
Mobil Oil N.Z. Ltd. - 1968
Squire Speedy - 1968
Side Rules
Appraisal Institute - 1951
Arthur Weimer - 1953
Leon Ellwood - 1959
1617 -- Clarence
Thomas Clay
1910
&
Norman Webb
1913 - Richard Parry
& eI rn st e& r
r so n
e k
n c
o e
y -e Ra ed cy k- R
R e a d R
Richard Ratcliff - 1949
1877 - Henry Hoskold
Ready-Reckoners
& Interest Tables
John Murray - 1949
166019301670 1680 1690
1950
1940 1700 1710
Irving Fisher - 1930
Ivan Thornson - 1932
Frederick Babcock - 1932
Phillip Kniskern - 1933
Ivan Thorson - 1936
Thurston Ross - 1937
162019101630 1640
19201650
Frederick Babcock - 1924
Arthur Mertzke - 1927
John Grimes &
William Craigue - 1928
1867 - Karl Marx
UK Land
Economists &
Valuation Model
Contributors
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
Richard Hurd - 1903
Irving Fisher - 1906
1848 - John Stuart Mill
Hoskold published "Enginer's Valuing Assistant"
reputedly created a capitalization rate @ speculative rate
+ sinking fund @ safe rate
Hurd defined urban value as economic rent or ground
rent capitalized.
Fisher reputedly coined the term "rate of capitalization"
&
thewrote
theory
of valuing
income-producing
Clay
and Necessary
"Easy,
Tables ofcapital.
Interest and
Webbs
A guide
published
of Real
Property:
Rents Foreborne,
also"Valuation
for the Valuation
of Leases,
Annuities
and to
the
valuation
of land
and buildings
etc. for various
purposes"which
Purchases
".
either
in Present
or in Reversion
capitalised nett annaul income at a number of years purchase.
Parry published "Parry’s Valuation and Investment Tables "
Babcock wrote "The Appraisal of Real Estate".
Mertzke advocated a "built-up capitalization rate".
Grimes & Craigue advocated a "three-interest-rate".
Fisher wrote "Theory of Interest ".
Petty developed capitalisation using "years purchase".
Thornson denounced "Annuitists" advocating Hoskold.
Newton established theorems of compound interest
Babcock advocated "Split capitalization rates" in "The
Phillips published "Compound interest & annuity" & misc
Appraisal of Real Estate".
tables for reconstruction after the 1666 Fire of London
Kniskern advocated a "Single capitalization rate" .
Thornson - advocated "Split-rate capitalization method"
with sinking fund added to the capitalization rate
Ross originated "Band-of-investment" method.
Ratcliff wrote "Urban Land Econmics"
John Murray wrote "Principles and Practice of Valuation"
Appraisal Institute starts "The Appraisal of Real Estate"
Weimer advocated "capitalization as only valid method"
Ellwood created mortgage-equity method and published
"Tables
for Real Estate
Appraising
and
Smart published
of Interest,
"Tables
Discount Annuites
Financing"
&c.
Mobil
N.Z. Ltd."Wealth
Publishes
"DCF Investment
Analysis"
Smith Oil
published
of Nations"incl. theory
of rent
Speedy
advocates
as function
of price."Investment by DCF methods."
Graaskamp promoted a practical computer service for
the income approach.
Graaskamp driving force behind EDUCARE courses at
Wisconsin University
Akerson developed "Ellwood Without Algebra method"
Kinnard publishes "Income Property Valuation"
Appraisal of Real Estate".
Kniskern advocated a "Single capitalization rate" .
Thornson - advocated "Split-rate capitalization method"
with sinking fund added to the capitalization rate
Ross originated "Band-of-investment" method.
alculators
R u l e s
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
1930
Frederick Babcock - 1932
Phillip Kniskern - 1933
Ivan Thorson - 1936
Thurston Ross - 1937
John Murray - 1949
Ratcliff wrote "Urban Land Econmics"
John Murray wrote "Principles and Practice of Valuation"
Computers
Appraisal Institute starts "The Appraisal of Real Estate"
Weimer advocated "capitalization as only valid method"
Ellwood created mortgage-equity method and published
"Tables for Real Estate Appraising and
Financing"
Mobil Oil N.Z. Ltd. Publishes "DCF Investment Analysis"
Speedy advocates "Investment by DCF methods."
Graaskamp promoted a practical computer service for
the income approach.
Graaskamp driving force behind EDUCARE courses at
Wisconsin University
Akerson developed "Ellwood Without Algebra method"
Kinnard publishes "Income Property Valuation"
Clay wrote
Necessary
"Easy, and
Tables of Interest and
Johnson
published
"The
Instant Mortgage-Equity
Rents Foreborne, also for the Valuation of Leases, Annuities and
Technique"
Purchasesaccredited
". the gradual
either in Present
in Reversion
Greaves
withor “...
catalysed
adoption of the DCF method of valuation in the UK"
Wood advocates a "real value valuation method"
North publishes "Real estate investment analysis and
valuation"
Marshall created "equated yield" model also producing
the initial tables & "Donaldson's Investment Tables"
Petty developed capitalisation using "years purchase".
(1979)
Newton
established
theorems
of compound
interest
Rose
publishes
"Rose’s
Property
Valuation Tables"
Phillips published
interest
& annuity"
& misc
Greenwell
W. &. Co"Compound
called for a "New
valuation
method"
tables for publishes
reconstruction
after the
1666 Fire
of London
Bowcock
"Property
Valuation
Tables"
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Computers
Electronic Calculators
1720
1726 - John Smart
1776 - Adam Smith
1730 1740 1750
R e a d y - R e c k o n e r s &
1670 1680 1690 1700
19801710
1980/82 - Stephen Sykes
1980/86 - Andrew Trott
1985 - Neil Crosby
Calculators
1660
1972 - Michael Greaves
1973 - Ernest Wood
1975/76 Philip Marshall
1976 - Jack Rose
1976 - Greenwell W. & Co.
1978 - Philip Bowcock
1978 - Alick Davidson
1662 - Sir William Petty
1667 - John Newton
1667 - Henry Phillips
Side Rules
1630 1640
1970 1650
James Mason - 1982
Gordon Blackadar -1981/83
1617 - Thomas Clay
Ready-Reckoners
& Interest Tables
1620
Charles Akerson - 1970
William Kinnard Jnr - 1971
Graaskamp - 1971
Irvin Johnson - 1972
Lincoln North - 1973
Jeffrey Fisher - 1979
UK Land
Economists &
Valuation Model
Contributors
James Graaskamp - 1969
Century/Decade
1960 1600 1610
1950
Appraisal Institute - 1951
Arthur Weimer - 1953
Leon Ellwood - 1959
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
Mobil Oil N.Z. Ltd. - 1968
Squire Speedy - 1968
Richard Ratcliff - 1949
1940
Chronological Overview – Mid 20th Century
Davidson published "Parry's Valuation and Investment
Tables" 10th Edition
Fisher - refined Ellwood’s J-Factors for straight-line or
Sykes proposes a "Rational valuation model"
Trott chaired "RICS Research project into property
valuation methods"
Blackadar developed a “dynamic capitalization” model
Mason produced "American Institute of Real Estate
Appraisers Financial Tables"
Crosby advocates a "hybrid equated yield and real value
Smart published "Tables of Interest, Discount Annuites
(short-cut DCF) model"
&c.
Fisher
and Martin"Wealth
publishof
"Income
Property
Appraisal"
Smith published
Nations"incl. theory
of rent
Appleby
& Westwood
as function
of price. publish "The Australian Valuation
and Life Annuity Tables"
Scarrett publishes "Property Valuation: The five
methods"
Brown proposed a "Split tenant-risk/market risk rate
model"
omputers
c Calculators
1978 - Philip Bowcock
1978 - Alick Davidson
e s
Lincoln North - 1973
Jeffrey Fisher - 1979
Marshall created "equated yield" model also producing
the initial tables & "Donaldson's Investment Tables"
(1979)
Rose publishes "Rose’s Property Valuation Tables"
Greenwell W. &. Co called for a "New valuation method"
Bowcock publishes "Property Valuation Tables"
Davidson published "Parry's Valuation and Investment
Tables" 10th Edition
Fisher - refined Ellwood’s J-Factors for straight-line or
Chronological Overview – Late 20th Century - 1990s
1617 - Thomas Clay
Computers
1730 1740 1750
Electronic Calcula
1720
1726 - John Smart
1776 - Adam Smith
s t&e
R e a dR ye - aRd ey c- kR oe nc ek ro sn &e rI n
1660
1990 1670 1680 1690 1700 1710
1991 - Douglas Scarrett
1994 - RICS
1995 - Gerald Brown
1662 - Sir William Petty
1995 - Alastair Adair et al
1667 - John Newton
1995 - Andrew Baum and
1667 - Henry Phillips
Neil Crosby
1995 - Nick French and
Charles Ward
1996 - Andrew Adams
and Philip Booth
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Computers
Calculators
Side Rules
1630 1640 1650
Jeffrey Fisher and
Robert Martin -1991
Ken Lusht - 1996
1980/82 - Stephen Sykes
1980/86 - Andrew Trott
1985 - Neil Crosby
Ready-Reckoners
& Interest Tables
1620
Appleby and Westwood 1991
Baillieu Knight Frank - 1992
Jefferies - 1990
Patrick Rowland - 1993
AIVLE - 1993.
Tom Whipple - 1995
Rodney Jefferies - 1995
NZIV - 1995
Rodney Jefferies - 1996/7
AIVLE - 1997
UK Land
Economists &
Valuation Model
Contributors
1600 1610
Century/Decade
1980
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
James Mason - 1982
Gordon Blackadar -1981/83
Sykes proposes a "Rational valuation model"
Trott chaired "RICS Research project into property
valuation methods"
Blackadar developed a “dynamic capitalization” model
Mason produced "American Institute of Real Estate
Appraisers Financial Tables"
Crosby advocates a "hybrid equated yield and real value
(short-cut DCF) model"
Fisher and Martin publish "Income Property Appraisal"
Appleby & Westwood publish "The Australian Valuation
and Life Annuity Tables"
Scarrett
publishes
"Property
Valuation:
five
Clay wrote
and
Necessary
"Easy, and
TablesThe
of Interest
methods"
Rents Foreborne, also for the Valuation of Leases, Annuities and
Brown
proposed
a "Split
risk rate
Purchases
either in Present
ortenant-risk/market
in Reversion ".
model"
Alastair Adair et al publish "European Valuation
Practice: Theory and Technique"
Baum and Crosby publish "Property Investment
Appraisal"
French & Ward proposed an "Arbitrage model"
Jefferies
published
"Urban Valuation
in Newpurchase".
Zealand Petty developed
capitalisation
using "years
Vol.
II" established theorems of compound interest
Newton
Rowland
publishes"Compound
"Property Investments
and Their
Phillips published
interest & annuity"
& misc
tables for reconstruction after the 1666 Fire of London
Financing"
Baillieu Knight Frank - organised the "Property
Economic Task Force"
AIVLE issue "Information Paper on Use of Discounted
Cash Flow in Property Valuations"
RICS - issues "The Mallinson Report - The President’s
Working Party on Commercial Property Valuations"
Whipple publishes "Property valuation and analysis"
Jefferies NZIV monograph "Discounted cash flow (DCF)
valuation techniques & spreadsheet applications"
NZIV issue "Guidance Note 4: Use of Discounted Cash
SmartTechniques
published "Tables
of Interest,
Discount Annuites
Flow
in Property
Valuations."
&c. publishes "Real Estate Valuation"
Lusht
Smith published
ofan
Nations"incl.
theory
Andrew
& Booth "Wealth
proposed
"Actuarial
and
a of rent
as function bond
of price.
convertible
model"
Isaac and Terry Steley publish "Property Valuation
Techniques"
Tony Johnson et al publish "Modern Methods of
Valuation - 9th Ed"
Kenneth Lusht publishes "Real Estate Valuation -
Jeffrey Fisher and
Robert Martin -1991
Ken Lusht - 1996
1990
Patrick Rowland - 1993
AIVLE - 1993.
Tom Whipple - 1995
Rodney Jefferies - 1995
NZIV - 1995
Rodney Jefferies - 1996/7
AIVLE - 1997
1995 - Alastair Adair et al
1995 - Andrew Baum and
Neil Crosby
1995 - Nick French and
Charles Ward
1996 - Andrew Adams
and Philip Booth
Vol. II"
Rowland publishes "Property Investments and Their
Financing"
Baillieu Knight Frank - organised the "Property
Economic Task Force"
AIVLE issue "Information Paper on Use of Discounted
Cash Flow in Property Valuations"
RICS - issues "The Mallinson Report - The President’s
Working Party on Commercial Property Valuations"
Whipple publishes "Property valuation and analysis"
Jefferies NZIV monograph "Discounted cash flow (DCF)
valuation techniques & spreadsheet applications"
NZIV issue "Guidance Note 4: Use of Discounted Cash
Flow Techniques in Property Valuations."
Lusht publishes "Real Estate Valuation"
Andrew & Booth proposed an "Actuarial and a
convertible bond model"
NOTES:
Key contributions
to land ecomomics
and income
valuation models
Computers
Com
puters
tronic Calculators
E l e cCalculators
1630 1640 1650
1720
1750
1740
1730
2020
2010
R e a d y - R e c k o n e r s &
16602000 1670 1680 1690 1700 1710
1726 - John Smart
1776 - Adam Smith
Side Rules
1620
2000 - David Isaac and
Terry Steley
2000 - Tony Johnson et al
2002
Harvard
1662 -- Tim
Sir William
Petty
2002
2008Newton
- Alick
1667 -&John
Davidson
1667 - Henry Phillips
2006 - Andrew Baum et al
2006 - Sarah Sayce et al
2007 - Peter Wyatt
2008 - Andrew Baum and
Neil Crosby
2008 - Douglas Scarrett
Ready-Reckoners
& Interest Tables
UK Land
Economists &
Valuation Model
Contributors
Century/Decade 1600 1610
USA Land
Economists &
Valuation Model
Contributors
Australia &
New Zealand Land
Economists &
Valuation Model
Contributors
Kenneth Lusht - 2000
Karl-Verner Schulte - 2001
Dominick Fischer - 2002
Charles Akerson - 2000 & 2009
Tom Whipple - 2006
Appraisal Institute - 2001 & 2008
Richard Reed - 2007
Jeffrey Fisher and Robert Martin 2005 & 2008
1617 - Thomas Clay
R e a d y - R e c k o n e r s & I n t e r e s t T a b l e s
Chronological Overview – Beginnings of 21st Century - 2000s
Isaac and Terry Steley publish "Property Valuation
Techniques"
Tony Johnson et al publish "Modern Methods of
Valuation - 9th Ed"
Clay wrote "Easy, and Necessary Tables of Interest and
Kenneth Lusht publishes "Real Estate Valuation Rents Foreborne, also for the Valuation of Leases, Annuities and
Principles and Applications"
Purchases either in Present or in Reversion ".
Akerson publishes AI's "Capitalisation Theory and
Techniques: Study Guide"
Schulte publishes "Real Estate Education Throughout
The World: Past, Present and Future"
Fischer publishes "Property Valuation Methodology"
Harvard publishes "Investment Property Valuation Today"
Davidson publishes 12th & 13th Edns of "Parry's
Petty developed
capitalisation
Valuation
& Investment
Tables"using "years purchase".
Newton established theorems of compound interest
AI publish 12th & 13th Edns of "The Appraisal of Real
Phillips published "Compound interest & annuity" & misc
Estate"
tables for reconstruction after the 1666 Fire of London
Fisher and Martin publish 2nd & 3rd Edns of "Income
Property Valuation"
Andrew Baum et al publish 4th Ed of "The Income
Approach to Property Valuation"
Sarah Sayce et al publish "Real Estate Appraisal: From
Value to Worth"
Whipple publishes 2nd Edn of "Property valuation and
analysis"
Reed edits "The valuation of real estate – the Australian
edition of the Appraisal of Real Estate – 12th Edn"
Wyatt
publishes "Tables
"Property
in an economic
Smart published
ofvaluation
Interest, Discount
Annuites
context"
&c.
Baum
and Crosby
publishof3rd
Edn of "Property
Smith published
"Wealth
Nations"incl. theory of rent
Investment
Appraisal"
as function of price.
Scarrett publishes 2nd Edn of "Property Valuation: The