Real Estate Appraisal In The Income Approach Application Parameters

Along with reforms of the land system in China, real estate appraisal is gradually becoming an important part of the market economy. The income approach is internationally recognized as one of the three popular valuation methods in real estate appraisal filed, income approach has a solid theoretical foundation and is widely used to appraise properties of practical income or potential income, the key lies in the determination of the parameters when using this method, especially the values of the expected income, capitalization rate or the discounted rate. However, in practice many problems still exist, for example, the parameters values are not scientifically set and the values are set too subjectively as well. How to set the parameters values scientifically and rationally when using the income method is the starting point of this thesis.Through the study of many valuation reports as samples and the statistical analysis of parameters among them, combined with interviews and discussion with practitioners and experts, it summarizes some characteristics and prominent issues in the application of the income approach. Based on mature experiences from the USA, Japan, Taiwan and Hong Kong for reference, some solutions are given to solve the issues above according to the actual conditions in our country.This paper argues that it should be analysed both qualitatively and quantitatively as well as the dynamic analysis of the parameters and the objective analysis of the subject to be valued when determining the values of the expected benefits and the capitalization rate or the discounted rate. In the meantime, measures such as regular surveys of the real estate market and the real estate investors should be taken in order to get the current market information and parameters values. In addition, this paper also discusses the deduction of incomes which are generated from business values or intangible assets. Some suggestions are still given in terms of parameters values, the judgement of risk and the selections of formulas.