This book is the 3rd edition of the popular text written by Douglas Scarrett and Sylvia Osborn. Preretirement Douglas Scarrett was Director of Estate Management at De Montford University and previously Deputy Head of the School of Land and Building Studies. Sylvia Osborn is Head of Academic Operations at the College of Estate Management, Reading, UK. Sylvia is also a member of the Editorial Advisory Board for Property Management and regularly reviews papers for the journal. Both authors have taught undergraduate valuation courses at their institutions for many years and this text seeks to fill an important role in providing an easy to follow teaching text.
The third edition of the book has been extensively revised to provide a more logical structure to the chapter outlines and to incorporate a greater focus on economic theory of value. It also links theory with practice in highlighting the constraints under which valuers practice. The objective of the book is to provide a structured approach to valuation and present the five basic approaches employed in real property valuation.
The book opens with an overview of the property market, the role property plays as an investment class and the basic economics of supply and demand as they impinge on property value. Chapter 2 provides a brief introduction to the property profession, with a particular focus on the UK market, the role of the RICS in establishing ethical standards, and the importance of the Red Book Valuation Standards are explained, along with aspects of the IVSC and the UK code of measuring practice.
Chapter 3 is entitled Valuation Formulae and, as the heading suggests, provides an overview of the most commonly used mathematical formulae in conducting property valuation. The discussion ranges from simple interest and time value of money calculations to effective yields and quarterly rent in advance calculations. All the basic needs of students studying valuation mathematics for the first time are covered in a succinctly presented tabulated format.
The remaining seven chapters move through the five basic methods of property valuation, commencing in Chapter 4 with the comparative method. The book dedicates Chapters 5 and 6 to the Investment Method with a chapter each to the traditional capitalisation method followed by the DCF approach. These chapters all include a number of worked examples to illustrate the method being discussed. This is a valuable addition for anyone trying to understand the methodology for the first time. The DCF section has a detailed explanation on how to correctly format a DCF calculation, which is a valuable section as there is considerable variation in approach exhibited by many practitioners.
The final chapters explore the residual and cost-based approaches to valuation and thus provide a comprehensive review of the more common valuation techniques. As noted above, each valuation methodology is accompanied by easy to follow worked examples providing a good learning tool for students. As this text is targeted at students in the early part of their studies, the book does not delve into the more complicated statistical mass evaluation techniques of hedonic pricing or option pricing models. In my view inclusion of these methods would have made a worthwhile addition to the text as these methods are becoming more widely used in practice.
There are a number of texts available written to provide an introduction to valuation methodology and the test of a good guide to valuation is one which guides the reader through the process of rigorous real estate evaluation and does not over complicate the mathematical methods used. The use of simple and well-explained practical examples are also a prerequisite of a quality text.
This is an excellent book for anyone teaching valuation at undergraduate level, therefore, as it ticks all the boxes of a quality teaching text. It is well-presented, easy to follow and logically organised in order to build on a student’s understanding of the five basic methods of property valuation. It would also be an excellent introduction for anyone in other property related fields who need to gain an understanding of how property valuation is undertaken. While there are a number of books on the market that address the basics of property valuation, this text presents a logically organised and well-illustrated text for undergraduate study. I would recommend it to anyone looking for an introductory valuation textbook for teaching purposes.
