The Science View on Valuation
Estimating Property Values in Times of Significant Uncertainty
In times of Covid-19 pandemic, property market or fair values are harder than ever to estimate. Valuers desperately trying to find enough ‘evidence’, but property is an illiquid asset by definition and as such, transactional evidence disappears during periods of market unrest.
So, what can property valuers do in times of market uncertainty?
The International Valuation Standards Council (IVSC), whose standards have been adopted by the ‘RICS Red Book’, issued a letter in March 2020 with the title ‘Dealing with valuation uncertainty at times of market unrest’. Their advice was mainly based on three points:
- If the valuer can’t carry out an inspection due to government restrictions, clearly state it and agree this with the client.
- If the valuer considers that it is not possible to provide a valuation on a restricted basis, the instruction should be declined.
- Valuers should not apply pre-crisis criteria to their valuations as this approach is based on the potentially erroneous assumption that values will return to their pre-crisis levels and there is no way of predicting that this assumption in fact correct.
As a valuer, Continue reading Valuation in crisis – Art versus Science – The Science View
By Victor Alarsa
If you are looking to get into Real Estate financier, here you will find a few metrics commonly used by loan underwriters.
As discussed in part 01, covenants are financial metrics used by lenders to determine how risky lending capital might be for a given project. We learnt about LTV/LTGDV/LTC, and now we are going to find out a bit more about two other important ratios: DSCR and ICR.
DSCR (Debt Service Coverage Ratio)
In short, DSCR is the ratio between cash available and cash required for debt servicing. In other words, it is the ratio of the right amount of cash to repay the debt.
Commercial lenders use the DSCR to assess how large a commercial loan can be supported by the cash flow generated by the asset.
Continue reading Financial metrics commonly used by loan underwriters (part 02)
By Victor Alarsa
If you are looking to get into Real Estate financier or just being more familiarised with its vocabulary, here you will find a few metrics commonly used by loan underwriters.
The daily life of a developer is not easy. They need lenders to help them to finance their developments, but lenders do not lend money without a thorough due diligence on the investment, starting with the covenants. Covenants imposes a limit on the amount of money a financier can lend to a development. In this article and the next, we are going to run through the most common covenant metrics used by loan underwriters.
Continue reading Financial metrics commonly used by loan underwriters (part 01)
By Victor Alarsa
Who’s responsible for granting planning permissions?
The planning system is designed to be applied by local authorities. There are three layers of authorities:
- Nationally (national plan)
- County councils (regional plan)
- Unitary authorities such as districts, boroughs or city councils, hereafter referred as to Local Planning Authority (LPA)
LPA is ultimately responsible for designing local plans and granting planning permission.
Continue reading An overview of the “UK-complex-housing-planning-permission-system”
By Victor Alarsa
In essence, the COUNTIFS function is used to count the number of cells that meet one or multiple criteria, given a specific range of the array.
You may have noticed that COUNTIFS has an “S” in the end, which differs from its cousin COUNTIF, which is programmed to count the number of cells meeting only one condition and a single range, whereas COUNTIFS accepts several criteria.
The formula is comprised of ( criteria range 1, criteria 1 ), this is the required argument. In case you want to add new criteria, just add after the first two arguments
E.g. ( criteria range 1, criteria 1, criteria range 2, criteria 2).
You could add as many criteria as you want. The criteria range accounts for the array you want to count (highlighting them), and the criteria are the condition to be tested against those values.
Continue reading Do you know how to count the number of cells filtering several different criteria using Excel?
By Victor Alarsa
If you are one of those who loves to model using lots of “IF”, “AND” and “OR” functions, then this article is for you.
Let’s discuss the SUMPRODUCT, which literally means summing up the multiplication (product) of two or more different arrays.
For example, if you want to calculate total rental value of a property with different floor sizes and rents per square foot, then you simply need to multiply each floor size by its corresponding rent and sum up everything in the end.
Continue reading The benefits of SUMPRODUCT?
By Victor Alarsa (email@example.com)
& Maria Wiedner (firstname.lastname@example.org)
We are living in the age of the City. Larger and denser cities are likelier to be more innovative and generate more wealth. For instance, as the population of a city increases by 100%, its residents get 115% more innovative, productive and hence 15% wealthier1. This attracts more people, which, in turn, makes the city larger, denser, more innovative, wealthier. This cycle continues up until a point when pollution, house unaffordability, traffic and crime outweigh the benefits of agglomeration, i.e. when a city becomes too large for its own sake.
Density in general is massively beneficial, for example in 2015, London represented 14% of the UK population but was responsible for 23% of its GDP. However, the virtuous cycle of agglomeration needs to be accompanied by a housing expansion, which many cities struggle with. In London, finding housing accommodation is a challenge; land is scarce and restrictions in planning permission deter new constructions. Demand, on the other hand, is further growing as people want to move to London where jobs are available and the clustering of people has made public goods such as entertainment, health and transport more accessible.
Continue reading London: Density vs. Price, Challenges & Opportunities
Real Estate financial models are mainly spreadsheets used extensively as an aid in decision support in the areas of property investment and lending. These spreadsheets will ascertain the present value of a stream of cash flows and generate risk / return ratios.
Continue reading Demystifying real estate financial models
First, we need to understand what a financial modelling is so we can keep this in mind throughout the test and better accept why companies are asking us more and more to go through Excel tests in order to proceed to the next round of interviews.
Financial Modelling in real estate is used as a decision making tool for investment purposes. Companies use financial models to forecast the future of a real estate asset or portfolio with several assets, including partially owned assets such as the case of joint-ventures. Continue reading How to prepare for a real estate financial modelling test
Being a highly productive financial analyst is not an innate talent; it’s simply a matter of organising your spreadsheets so that you can efficiently get the right calculations and analysis done. Real estate financial analysts in particular…
So, what behaviors define highly productive financial analysts? What habits and strategies make them consistently more productive than others? And what can you do to increase your own analytical productivity?
Here are some ideas to get you started: Continue reading 5 Things Highly Productive Financial Analysts Do Differently