The Income Approach to Property Valuation (6th edition)

Citation

French, N. (2011), "The Income Approach to Property Valuation (6th edition)", Journal of Property Investment & Finance, Vol. 29 No. 6, pp. 714-715. https://doi.org/10.1108/jpif.2011.29.6.714.1

If you know the feeling of a long lost friend returning after a period of not being close, then you will know the feeling that I felt when I read the new edition of The Income Approach to Property Valuation. I grew up with this text. It was the first text that I read; it was the text that helped to establish my fascination and my own understanding of property valuation and pricing. Admittedly, I was equally lucky to have Andrew Baum and David Mackmin as my tutors at University but, perhaps sadly, my leaf worn copy of the first edition of this text was my constant companion. It was a great text.

During the interim years, the text has gone through a number of incarnations in different formats, each with a varying degree of success but I am glad to say that the latest edition is a return to form. Once again it feels like, and is, a substantial textbook that, for the whole, covers the salient aspects of the property market and the valuation of property as an asset.

The book is divided into a number of chapters:

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  Chapter 1. Introduction and quick start to the income approach.

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  Chapter 2. Financial mathematics for property valuers.

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  Chapter 3. Discounted cash flow.

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  Chapter 4. Basic principles.

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  Chapter 5. The income approach: freeholds,.

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  Chapter 6. The income approach: leaseholds.

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  Chapter 7. The income approach: taxation and valuation.

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  Chapter 8. Landlord and tenant (valuations and negotiations).

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  Chapter 9. The effects of legislation.

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  Chapter 10. Development opportunities.

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  Chapter 11. Profits approach for trade related properties.

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  Chapter 12. Investment analysis.

As with any text, it could be argued that the chapters could be reordered. For example, I would prefer the discussion in chapter 12 to be much earlier so that the distinction between “price”, “value” and “worth” is discussed in more depth before the reader plunges into the chapters on valuation methods, but that is a pedantry. The book flows well and is a great exposition of how markets work (or do not work) and how the valuer needs to read the market signs to value a property in a given market.

My only substantial criticisms of the book are the sections relating to spreadsheets. The sections are too short and fail to recognise the breadth of functions that are inbuilt in Excel and other spreadsheets. I cannot imagine writing any spreadsheet today without naming cells, yet this is not mentioned. It may have been better to omit these sections. The other part of the book which needs to be fully reconsidered is the inclusion of a 25 page appendix on dual rate leasehold valuations. The book itself says that this is a discredited and rarely used method; chapter 6 deals with the more appropriate methods of valuing leasehold interests so why include this appendix. I imagine the 7th edition will be published without this appendix.

But, given that those criticisms only refer to some ten pages of Excel commentary and an appendix outwith the main text, this is still the best introductory text on the market. Baum is the author of a number of other texts that are more advanced or more specialised (all of which are excellent) but if you are a student studying property valuation for the first time, ignore the plethora of other textbooks that purport to be good introductions to the topic. Just buy this book, you will not regret it.