Standard Ground Value in the Context of the Harmonisation of Property Valuation

In the wake of the continually growing internationalisation in the property industry the pressure for harmonised property valuations is ever increasing. The International Valuation Standards Committee has addressed this need with the release of the Inter-national Valuation Standards, which have served to provide an internationally recognised market value definition, while the methods and practices of valuation remain in the discretion of the valuer. In spite of the general compatibility of valuation methods the provision for ground values has been a continuing subject of discussion among the advocates of either school of thought. The fundamental character of this aspect of valuation gives the discussion a pivotal role in the harmonisation of property valuation. In this context the author has examined the methodological and quantitative impact of the provision for standard ground value, which inherently includes the application of remaining life. The subject of analysis is the German Income Method, which represents the prominent field of application of the standard ground value. For this purpose the concept of standard ground value and its effect on property values will be introduced. The methodological analysis determines the scope and limits of conventional income valuations as well as the amount of added information, which can be derived from the standard ground value. The quantitative analysis is based on data provided by the IPD Investment Property Databank. The data supports the conclusion from the methodological analysis that ñ in view of a harmonised property valuation ñ the standard ground value does not require explicit provision for, while offering added informational value in cases of short remaining building life.