The Economic Value of Residential Land in Historical Areas: An Application of the Residual Method to the Secondary Market

Armengot Paradinas, Jaime and García Erviti, Federico (2012). The Economic Value of Residential Land in Historical Areas: An Application of the Residual Method to the Secondary Market. In: "XXXVIII International Association for Housing Science IAHS World Congress", 16-19 abril 2012, Istanbul. ISBN 978-975-561-417-5.

Description

Title: The Economic Value of Residential Land in Historical Areas: An Application of the Residual Method to the Secondary Market
Author/s:
  • Armengot Paradinas, Jaime
  • García Erviti, Federico
Item Type: Presentation at Congress or Conference (Article)
Event Title: XXXVIII International Association for Housing Science IAHS World Congress
Event Dates: 16-19 abril 2012
Event Location: Istanbul
Title of Book: Visions for the future of housing: Mega Cities
Date: April 2012
ISBN: 978-975-561-417-5
Subjects:
Faculty: E.T.S. Arquitectura (UPM)
Department: Construcción y Tecnología Arquitectónica
Creative Commons Licenses: None

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Abstract

Land value bears significant weight in house prices in historical town centers. An essential aim for regulating the mortgage market, particularly in the financial and property crisis that countries such as Spain are undergoing, is to have at hand objective procedures for its valuation, whatever the conditions (location, construction, planning). Of all the factors contributing to house price make-up, the land is the only one whose value does not depend on acquisition cost, but rather on the location-time binomial. That is to say, the specific circumstances at that point and at the exact moment of valuation. For this reason, the most commonly applied procedure for land valuation in town centers is the use of the residual method: once the selling price of new housing in a district is known, the other necessary costs and expenses of development are deducted, including those of building and the developer’s profit. The value left is that of the land. To apply these procedures it is vital to have figures such as building costs, technical fees, tax costs, etc. But, above all, it is essential to obtain the selling price of the new housing. This is not always feasible, on account of the lack of newbuild development in this location. This shortage of information occurs in historical town cities, where urban renewal is slight due to the heritage-protection policies, and where, nevertheless there is substantial activity in the secondary market. In these circumstances, as an alternative for land valuation in consolidated urban areas, we have the adaptation of the residual method to the particular characteristics of the secondary market. To these ends, there is the proposal for the appreciation of the dwelling which follows, in a backwards direction, the application of traditional depreciation methods proposed by the various valuation manuals and guidelines. The reliability of the results obtained is analyzed by contrasting it with published figures for newly-built properties, according to different rules applied in administrative appraisals in Spain and the incidence of an eventual correction due to conservation state.

More information

Item ID: 12657
DC Identifier: http://oa.upm.es/12657/
OAI Identifier: oai:oa.upm.es:12657
Deposited by: Profesor Federico Garcia Erviti
Deposited on: 06 Aug 2012 11:54
Last Modified: 21 Apr 2016 11:56
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