16634 Lecture 1: 1.3 Capitalisation Principles Part 3
Document Summary
The percentage return received from an income producing property is called a capitalisation rate (as opposed to an interest rate). Key features of capitalisation rates for valuation: purpose value incoming producing properties. Rate = a decrease in property value & decrease in cap. Rate = an increase in property value: adjustments cap. rate must be adjusted for various determinants. Determinants of capitalisation rates for commercial office property. Alternative investments equities, bonds, other property etc. Building features, services and reputation of the building. Characteristics of property as an asset class illiquid. Economic situation international, national, state, local. Growth prospects potential for rental growth and capital growth. Location precinct and position within the precinct. Planning zoning, far, height limitations, etc. Risk the chance of events not occurring as anticipated. Sentiment towards property as an asset class. State of the property market supply and demand by investors/occupiers. Tenant security and regularity of the rental income.
