Valuation - General

Question 1

What are the three main purposes for valuation?

Answer 1

Investment Operational Occupational

Question 2

How is valuation defined?

Answer 2

An opinion of the value of an asset or liability on a stated basis, as at a specified date

Question 3

Name two relevant and helpful valuation documents.

Answer 3

Rating Consultancy Code of Practice, 5th Edition
The Contractor’s Basis of Valuation for Rating Purposes, 2nd Edition

Question 4

What are three types of valuations mentioned in the Red Book?

Answer 4

Market Value: The estimated amount for which an asset should exchange on the valuation date between a willing buyer and seller in an arm’s length transaction.
Investment Value: The value of an asset to a particular investor, based on individual investment requirements.
Fair Value: Often used for financial reporting, reflecting the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction.

Question 5

What are three valuation approaches mentioned in the Red Book?

Answer 5

Income approach
Cost approach
Comparable (market) approach

Question 6

What is investment value?

Answer 6

A measure of the value of ownership benefits to the current or prospective owner Recognises that these benefits may differ from those of a typical market participant

Question 7

What are the five main types of valuation?

Answer 7

Acronym: CPRIC
Comparative: Based on transactions of similar properties
Profit: For profit-generating properties, using the profits method Residual: For properties with development potential
Investment: Based on income-generating potential
Contractor’s (or depreciated replacement cost): No direct comparison; estimates cost of replacing the asset, adjusted for depreciation

Question 8

What is the Code of Measurement Practice?

Answer 8

The RICS Code of Measurement Practice (6th Edition, 2015) is a guidance document It is not mandatory but is widely used for legacy purposes or where IPMS is not required GEA: Gross External Area — measured to the external face of each floor level GIA: Gross Internal Area — measured to the internal face of perimeter walls NIA: Net Internal Area — usable floor space measured to the internal face of perimeter walls

Question 9

What is the purpose of IPMS: All Buildings?

Answer 9

To ensure consistent measurement of property across global markets
Promotes transparency and comparability in property data Reduces variation caused by differing national measurement standards

Question 10

What are the five measurement principles?

Answer 10

Acronym: COCCR
Consistency:
Objectivity:
Clarity:
Common sense:
Reconciliation: Enables comparison and alignment between IPMS and other standards

Question 11

Summarise IPMS for residential property.

Answer 11

IPMS 1: Measures Gross External Area (GEA) — includes all external walls
IPMS 2: Measures to the Internal Dominant Face (IDF) — typically used for internal planning
IPMS 3A: Measures exclusive GEA — areas occupied by a single tenant or owner
IPMS 3B: Measures exclusive Net Internal Area (NIA) — to IDF and finished surface of internal perimeter walls
IPMS 3C: Measures exclusive Internal Enclosed Area (IEA) — to IDF and finished surface of all internal walls

Question 12

Summarise IPMS for office property.

Answer 12

IPMS 1: Measures Gross External Area (GEA) — includes all external walls
IPMS 2: Measures to the Internal Dominant Face (IDF) — defined as the surface covering 50% or more of the internal wall area
IPMS 3: Measures exclusive use floor area, excluding standard facilities (e.g. shared lobbies, stairwells, lifts)