The use of income valuation methods to value rural property

Despite the advances that have been made in relation to the valuation of commercial, industrial and retail property, there has not been the same progress in relation to the valuation of rural property. Although the majority of rural property valuations also require the valuer to carry out a full analysis of the economic performance of the farming operations, this information is rarely used to assess the value of the property, nor is it even used for a secondary valuation method. Over the past 20 years the nature of rural valuation practice has required rural valuers to undertake studies in both agriculture (farm management) and valuation, especially if carrying out valuation work for financial institutions. The additional farm financial information obtained by rural valuers exceeds that level of information required to value commercial, retail and industrial by the capitalisation of net rent/profit valuation method and is very similar to the level of information required for the valuation of commercial and retail property by the Discounted Cash Flow valuation method. On this basis the valuers specialising in rural valuation practice should have the necessary skills and information to value rural properties by an income valuation method. Although the direct comparison method of valuation has been sufficient in the past to value rural properties the future use of the method as the main valuation method is limited and valuers need to adopt an income valuation method as at least a secondary valuation method to overcome the problems associated with the use of direct comparison as the only rural property valuation method. This paper will review the results of an extensive survey carried out by rural property valuers in New South Wales (NSW), Australia, in relation to the impact of farm management on rural property values and rural property income potential.

The impact of natural disasters on residential property markets

Over the past ten years various residential property markets throughout Australia in general and NSW in particular have been subject to substantial natural disasters. These occurrences have included floods, bushfires and hailstorms. In extreme cases the actual rectification costs have been up to AUD$1.5 billion, which occurred with the severe hailstorm in Sydney in April 1999 and cyclone Tracey in Darwin in 1974. Natural disasters such as severe storms and hailstorms have tended to be very indiscriminate in relation to frequency and the actual location of damage, whereas the nature of bushfire and flooding tends to be more defined. Although these extreme natural disasters tend to be infrequent, occurrences of floods and bushfires in residential property areas are more frequent, particularly as urban sprawl encroaches closer to national Parks, State recreation Parks and State forests. Considerable work has been carried out on flood effects on property markets by Bell (1999), Donnelly (1988), McClusky and Rausser (2001), Skrantz and Strickland (1987) in the US, and Chou and Shih (2001) in Taiwan. Fibbens (1994), Lambley and Cordery (1991) and Eves (1999, 2001, 2002) have carried out studies in relation to the effect of flooding on residential property values in the Sydney region, including the tracking of flood prone property values over time. However, no similar rigorous research has been carried out in relation to the impact of bushfires on residential property markets in the Sydney region.

The true cost and performance of individual residential property investment and the implication on real estate agency practice

Investment in residential property in Australia is not dominated by the major investment institutions in to the same degree as the commercial, industrial and retail property markets. As at December 2001, the Property Council of Australia Investment Performance Index contained residential property with a total value of $235 million, which represents only 0.3% of the total PCA Performance Index value. The majority of investment in the Australian residential property market is by small investment companies and individual investors. The limited exposure of residential property in the institutional investment portfolios has also limited the research that has been undertaken in relation to residential property performance. However the importance of individual investment in residential property is continuing to gain importance as both individuals are now taking control of their own superannuation portfolios and the various State Governments of Australia are decreasing their involvement in the construction of public housing by subsidizing low-income families into the private residential property market. This paper will: • Provide a comparison of the cost to initially purchase residential property in the various capital city residential property markets in Australia, and • Analyse the true cost and investment performance of residential property in the main residential property markets in Australia based on a standard investment portfolio in each of the State capital cities and relate these results to real estate marketing and agency practice.

The Influence of Farm Management on NSW Rural Property Income and Total Average Annual Returns

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes, profitability and land values. This paper will analyse both the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on several rural land use classifications and will compare the total return from rural properties based on the farm income generated by both the average farmer and those farmers considered to be in the top 20% of the various land use areas. The analysis will provide a comprehensive overview of rural production in a free trade economy.

The impact of flooding on residential property values in England

Severe flooding throughout England in Autumn 1998 and 2000, has seen an increase in the extent of flood liable residential areas throughout England, as well as an increase in the actual levels of flood damage in all previously recognised flood prone residential areas. The increasing cost of rectifying the damage caused to residential properties from flooding has been of some concern to the residential property valuation profession and sales and leasing agency practices. However, the increasing trend in the frequency of flooding in England, combined with an increase in severity of flooding is now causing some degree of concern in the residential insurance and housing finance sectors. In order to determine and quantify the impact of flooding and flood damage on the residential property market in England, a survey of Chartered Surveyors and Chartered Real Estate Valuers has been carried out across the main flood affected counties of England. This survey will provide similar details to the research completed by Eves (1999, 2001) and Fibbens (1993) in relation to residential property flooding in Australia. This survey provides comprehensive responses in relation to the degree of flood affectation across counties, the effect of flooding on residential property values, the impact of flooding on building insurance premiums and possible difficulties in obtaining finance to purchase residential property in recognised flood areas.

Waterfront Development for Residential Property in Malaysia

Rivers and water are valuable natural resources for human life, environment and national development. Recognition of water resources as national heritage will contribute towards more long term sustainable property development. Waterfront development is already a well-established phenomenon internationally. In Malaysia, as the economy began to change in 1980s, so did the land uses along many of the river and waterfront locations. The pressures of new technology coupled with an urban population growth and urbanization began to force a transition from water dependent industry to a variety of non-water dependent developments such as apartments, offices, and retail shopping areas. Residential waterfront development has taken advantage of available land and water amenities and incorporated as a feature or “selling point” of the development. It has been found that wide views of water add an average of 59% to the value of waterfront property, as well as providing attractive landscaping and better property neighborhoods respectively. Development of waterfront lands in Malaysia occurred with limited federal, state, or municipal planning guidance; resulting in cost aspects like flooding and pollution. Although some waterfront development projects continue to remain profitable with a maintained successful public access component, many have not. This paper provides a brief introduction to the research project to address this issue, which is currently on-going.

Application of bag sampling technique for particle size distribution measurements

Bag sampling techniques can be used to temporarily store an aerosol and therefore provide sufficient time to utilize sensitive but slow instrumental techniques for recording detailed particle size distributions. Laboratory based assessment of the method were conducted to examine size dependant deposition loss coefficients for aerosols held in VelostatTM bags conforming to a horizontal cylindrical geometry. Deposition losses of NaCl particles in the range of 10 nm to 160 nm were analysed in relation to the bag size, storage time, and sampling flow rate. Results of this study suggest that the bag sampling method is most useful for moderately short sampling periods of about 5 minutes.

Report to the Government 2.0 Taskforce : Project 4 - Copyright Law and Intellectual Property

This report is the primary output of Project 4: Copyright and Intellectual Property, the aim of which was to produce a report considering how greater access to and use of government information could be achieved within the scope of the current copyright law. In our submission for Project 4, we undertook to address: •the policy rationales underlying copyright and how they apply in the context of materials owned, held and used by government; • the recommendations of the Copyright Law Review Committee (CLRC) in its 2005 report on Crown copyright; • the legislative and regulatory barriers to information sharing in key domains, including where legal impediments such as copyright have been relied upon (whether rightly or wrongly) to justify a refusal to provide access to government data; • copyright licensing models appropriate to government materials and examples of licensing initiatives in Australia and other relevant jurisdictions; and • issues specific to the galleries, libraries, archives and museums (“GLAM”) sector, including management of copyright in legacy materials and “orphan” works. In addressing these areas, we analysed the submissions received in response to the Government 2.0 Taskforce Issues Paper, consulted with members of the Task Force as well as several key stakeholders and considered the comments posted on the Task Force’s blog. This Project Report sets out our findings on the above issues. It puts forward recommendations for consideration by the Government 2.0 Task Force on steps that can be taken to ensure that copyright and intellectual property promote access to and use of government information.

An evaluation of how well undergraduate property students are prepared for commencing their careers

The evolution of property education to adapt to the changing business environment requires changes to course content, methods of delivery and assessment. Many universities have a special interest in understanding how successfully students transition in and transition out of property programs. This study sought the views of final year students engaged in professional employment, employer representatives and representatives from professional associations to assess the preparedness of students to commence professional employment. The study showed that generally students possessed an appropriate level of technical and ‘soft skills’ to enter the professional realm with development required in some areas. All stakeholders agreed that the transition out of university was made more seamless through greater engagement with industry through field work and work experience from the intermediate stages of the property course.

Comparing "socially responsible" and "sustainable" commercial property investment

Purpose – The purpose of this paper is to set out to explore the similarities and differences between jargon used to describe future-focussed commercial building product. This is not so much an exercise in semantics as an attempt to demonstrate that responses to challenges facing the construction and property sectors may have more to do with language than is generally appreciated. Design/methodology/approach – This is a conceptual analysis which draws upon relevant literature. Findings – Social responsibility and sustainability are often held to be much the same thing, with each term presupposing the existence of the other. Clearly, however, there are incidences where sustainable commercial property investment (SCPI) may not be particularly socially responsible, despite being understood as an environmentally friendly initiative. By contrast, socially responsible assets, at least in theory, should always be more sustainable than mainstream non-ethically based investment. Put simply, the expression of social responsibility in the built environment may evoke, and thereby deliver, a more sustainable product, as defined by wider socially inclusive parameters. Practical implications – The findings show that promoting an ethic of social responsibility may well result in more SCPI. Thus, the further articulation and celebration of social responsibility concepts may well help to further advance a sustainable property investment agenda, which is arguably more concerned about demonstrability of efficiency than wider public good outcomes. Originality/value – The idea that jargon affects outcomes is not new. However, this idea has rarely, if ever, been applied to the distinctions between social responsibility and sustainability. Even a moderate re-emphasis on social responsibility in preference to sustainability may well provide significant future benefits with respect to the investment, building and refurbishment of commercial property.

Dislodgement of commercial property public debt markets : the case of U.S. and Australia

The paper investigates if there are any discernible trends in the U.S. and Australian commercial property public debt markets with the onset of the global financial crisis (GFC). Commercial mortgage-backed securities and unsecured bonds issued by real estate investment trusts for the period 2000 to Q3:2009 are reviewed. It is shown that events in the equity markets have an impact on the pricing of these two instruments. Furthermore, the impact of subdued activity in these financing instruments on the commercial property market is discussed.

Determinants and market impact of seasoned equity offerings : the case of A-REITs

The paper examines the decision by Australian Real Estate Trusts (A-REITs) to issue seasoned equity offerings from 2000 - 2008 and stock market reaction to the offerings. The findings reveal that highly leveraged A-REITs with variable earnings are less likely to issue seasoned equity offerings. Inconsistent results for structure and type of properties held by the A-REIT do not allow for inference to be drawn. Similar to previous studies of seasoned equity offerings, we find a significant negative abnormal return associated with their announcement and no evidence of excessive leakage of information. Furthermore, market reaction differences to announcements of SEOs for the pre-global financial crisis (GFC) (2000-2006) and GFC eras (2007-2008) are noted with GFC era shareholders incurring larger abnormal return losses at 1.13% in comparison to the pre-GFC era shareholder loss of 0.34% on the SEO announcement day. Cross-sectional regressions show that the issued amount, leverage and profitability are significant factors affecting abnormal returns. Growth opportunities, tangibility, operating risk, size of A-REIT and other variables capturing A-REIT structure and property types held do not have an impact on abnormal returns

A study into the permeability and compressibility of Australian bagasse pulp

This is an experimental study into the permeability and compressibility properties of bagasse pulp pads. Three experimental rigs were custom-built for this project. The experimental work is complemented by modelling work. Both the steady-state and dynamic behaviour of pulp pads are evaluated in the experimental and modelling components of this project. Bagasse, the fibrous residue that remains after sugar is extracted from sugarcane, is normally burnt in Australia to generate steam and electricity for the sugar factory. A study into bagasse pulp was motivated by the possibility of making highly value-added pulp products from bagasse for the financial benefit of sugarcane millers and growers. The bagasse pulp and paper industry is a multibillion dollar industry (1). Bagasse pulp could replace eucalypt pulp which is more widely used in the local production of paper products. An opportunity exists for replacing the large quantity of mainly generic paper products imported to Australia. This includes 949,000 tonnes of generic photocopier papers (2). The use of bagasse pulp for paper manufacture is the main application area of interest for this study. Bagasse contains a large quantity of short parenchyma cells called ‘pith’. Around 30% of the shortest fibres are removed from bagasse prior to pulping. Despite the ‘depithing’ operations in conventional bagasse pulp mills, a large amount of pith remains in the pulp. Amongst Australian paper producers there is a perception that the high quantity of short fibres in bagasse pulp leads to poor filtration behaviour at the wet-end of a paper machine. Bagasse pulp’s poor filtration behaviour reduces paper production rates and consequently revenue when compared to paper production using locally made eucalypt pulp. Pulp filtration can be characterised by two interacting factors; permeability and compressibility. Surprisingly, there has previously been very little rigorous investigation into neither bagasse pulp permeability nor compressibility. Only freeness testing of bagasse pulp has been published in the open literature. As a result, this study has focussed on a detailed investigation of the filtration properties of bagasse pulp pads. As part of this investigation, this study investigated three options for improving the permeability and compressibility properties of Australian bagasse pulp pads. Two options for further pre-treating depithed bagasse prior to pulping were considered. Firstly, bagasse was fractionated based on size. Two bagasse fractions were produced, ‘coarse’ and ‘medium’ bagasse fractions. Secondly, bagasse was collected after being processed on two types of juice extraction technology, i.e. from a sugar mill and from a sugar diffuser. Finally one method of post-treating the bagasse pulp was investigated. The effects of chemical additives, which are known to improve freeness, were also assessed for their effect on pulp pad permeability and compressibility. Pre-treated Australian bagasse pulp samples were compared with several benchmark pulp samples. A sample of commonly used kraft Eucalyptus globulus pulp was obtained. A sample of depithed Argentinean bagasse, which is used for commercial paper production, was also obtained. A sample of Australian bagasse which was depithed as per typical factory operations was also produced for benchmarking purposes. The steady-state pulp pad permeability and compressibility parameters were determined experimentally using two purpose-built experimental rigs. In reality, steady-state conditions do not exist on a paper machine. The permeability changes as the sheet compresses over time. Hence, a dynamic model was developed which uses the experimentally determined steady-state permeability and compressibility parameters as inputs. The filtration model was developed with a view to designing pulp processing equipment that is suitable specifically for bagasse pulp. The predicted results of the dynamic model were compared to experimental data. The effectiveness of a polymeric and microparticle chemical additives for improving the retention of short fibres and increasing the drainage rate of a bagasse pulp slurry was determined in a third purpose-built rig; a modified Dynamic Drainage Jar (DDJ). These chemical additives were then used in the making of a pulp pad, and their effect on the steady-state and dynamic permeability and compressibility of bagasse pulp pads was determined. The most important finding from this investigation was that Australian bagasse pulp was produced with higher permeability than eucalypt pulp, despite a higher overall content of short fibres. It is thought this research outcome could enable Australian paper producers to switch from eucalypt pulp to bagasse pulp without sacrificing paper machine productivity. It is thought that two factors contributed to the high permeability of the bagasse pulp pad. Firstly, thicker cell walls of the bagasse pulp fibres resulted in high fibre stiffness. Secondly, the bagasse pulp had a large proportion of fibres longer than 1.3 mm. These attributes helped to reinforce the pulp pad matrix. The steady-state permeability and compressibility parameters for the eucalypt pulp were consistent with those found by previous workers. It was also found that Australian pulp derived from the ‘coarse’ bagasse fraction had higher steady-state permeability than the ‘medium’ fraction. However, there was no difference between bagasse pulp originating from a diffuser or a mill. The bagasse pre-treatment options investigated in this study were not found to affect the steady-state compressibility parameters of a pulp pad. The dynamic filtration model was found to give predictions that were in good agreement with experimental data for pads made from samples of pretreated bagasse pulp, provided at least some pith was removed prior to pulping. Applying vacuum to a pulp slurry in the modified DDJ dramatically reduced the drainage time. At any level of vacuum, bagasse pulp benefitted from chemical additives as quantified by reduced drainage time and increased retention of short fibres. Using the modified DDJ, it was observed that under specific conditions, a benchmark depithed bagasse pulp drained more rapidly than the ‘coarse’ bagasse pulp. In steady-state permeability and compressibility experiments, the addition of chemical additives improved the pad permeability and compressibility of a benchmark bagasse pulp with a high quantity of short fibres. Importantly, this effect was not observed for the ‘coarse’ bagasse pulp. However, dynamic filtration experiments showed that there was also a small observable improvement in filtration for the ‘medium’ bagasse pulp. The mechanism of bagasse pulp pad consolidation appears to be by fibre realignment. Chemical additives assist to lubricate the consolidation process. This study was complemented by pulp physical and chemical property testing and a microscopy study. In addition to its high pulp pad permeability, ‘coarse’ bagasse pulp often (but not always) had superior physical properties than a benchmark depithed bagasse pulp.