AbstractThere
is a substantial literature which suggests that appraisals are smoothed
and lag the true level of prices. This study combines a qualitative
interview survey of the leading fund manager/owners in the UK and their
appraisers with a empirical study of the number of appraisals which change
each month within the IPD Monthly Index. The paper concentrates on how
the appraisal process operates for commercial real estate performance measurement
purposes. The survey interviews suggest that periodic appraisal services
are consolidating in fewer firms and, within these major firms, appraisers
adopt different approaches to changing appraisals on a period by period
basis, with some wanting hard transaction evidence while others act on
‘softer’ signals. The survey also indicates a seasonal effect with
greater effort and information being applied to annual and quarterly appraisals
than monthly. The analysis of the appraisals within the IPD Monthly
Index confirms this effect with around 5% more appraisals being moved at
each quarter day than the other months. More November appraisals
change than expected and this suggests that the increased information flows
for the December end year appraisals are flowing through into earlier appraisals,
especially as client/appraiser draft appraisal meetings for the December
appraisals, a regular occurrence in the UK, can occur in November.
January illustrates significantly less activity than other months, a seasonal
effect after the exertions of the December appraisals.
|