A brief history and development of 'real value' valuation models - the last four decades

Abstract

This paper summarises the author's research of the literature related to the concept of 'real value' valuation models as applied to income or investment property which transpires to be, on one hand interesting, but on the other-hand disappointing in their scope and lack of adoption by the valuation profession. The basic real value valuation model was promoted in the UK as a ''positive'' investment valuation model in the early 1970's. However, it foundered in the 1980s due to the rejection of the (then) complicated formulary and mathematical calculations required in favour of a more recognisable nominal 'equated yield' valuation model. To a lesser degree and in a different format, a not dissimilar "dynamic capitalisation" valuation model was promoted in the 1980s in the USA. That model also appears to have similarly foundered in favour of the (then) well established 'mortgage-equity' appraisal model then in use since the 1960's. The author has, over the last decade, further developed a more contemporary and adaptable 'real value' valuation model that differs in some important aspects from these UK and USA models particularly in its user-friendly spreadsheet template model format with a flexibility that hopefully will not suffer the same ultimate oblivion as these earlier models.