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Market value is an estimation of price in the market. It is value in exchange. The valuer's role is to determine the appropriate approach, the method and use the right model to achieve this aim as best as possible. However, underpinning all valuations and property analysis are valuation standards and definitions. This paper looks at the definition of market value and how some market participants may misunderstand or even misrepresent it. This is particularly true when there is a downturn in the market.

This practice briefing is an overview of the role of market value as a definition of price and how it is often misused by stakeholders in the property market.

This briefing is a review of the valuation definitions clarifying what they mean and what they do not mean.

The role of the valuer in practice is to use the appropriate definition for the task in hand. The understanding of those definitions is central to the valuation process.

This provides guidance on how valuation definitions can be presented to the client in accordance with the International Valuation Standards.

Responds to “A note on ‘The initial yield revealed: explicit valuations and the future of property investment’” published in an earlier issue of the Journal of Property Valuation & Investment. Addresses issues raised and develops and extends the organizations of the original paper, in particular: definitions of certain concepts; the determination of value; the need for explicit valuations; price formation in the property market; and the influence of valuation on price. Reiterates the purposes of the original worked example of valuations; produces a corrected version; and in an appendix presents extended solutions and a fuller discussion of the central issues.

Examines the methodological issues that arise in generating standardised transaction data for use in analysing the determinants of retail rents. Looks at the issues raised by the use of comparative information and the existence of widely accepted conventions for adjusting comparative evidence to allow for the specific physical and legal characteristics of individual properties. Concludes by questioning the need to test valuation convention against market evidence and the notion of open market value is reassessed.

Provides an indication of the results of a large‐scale survey of the application of investment valuation techniques to the reversionary freeholds in UK practice. Identifies trends in the use of methods in practice for both market valuation and analysis of worth/price purposes. Concludes the use of growth explicit techniques is confined to the analysis role and that the conventional term and reversion approach to market valuation is being supplanted by equivalent yield and layer methods.

Examines the valuation of property investments let at rents in excess of their estimated rental values. Summarises the conventional and contemporary approaches to market valuation. Exposes the limitations of the models via an examination of some actual valuations taken from the UK property market. Concludes that future rental growth prospects must be dealt with explicitly in these valuations.

Examines the valuation difficulties that have arisen as a result of the falls in rental value in the UK property market during the early part of the 1990s. Considers overage cases being caused by the rent passing being above rental value on a normal rent review pattern because of a letting on an abnormal review pattern. Comments on the straightforward case of a fall in rental value since the last rent revision. Concludes that the growth explicit model is a better and more consistent methodology for the market valuation of investment property.

Equated yield and other contemporary investment valuation techniques are usually defended as techniques which are relevant for the analysis of market values or prices, but not relevant for market valuation. Part one of this paper investigates the reasons behind this view and suggests that a proper technique should have a logical base and be as objective as possible in the use of comparables. Each part concentrates upon the Market Valuation of freehold reversionary property investments. The logic of both conventional and contemporary techniques is investigated by examining the changing perceptions of investors since the Second World War. It is concluded that equated yield techniques can lay claim to a logical base. The analysis of comparables by each method is then examined and it is concluded that, at this stage of a valuation, equivalent yield analysis is objective but equated yield analysis requires subjective assumptions. This conclusion is re‐examined in part two of the paper.

In Part One of this paper, the logical basis of the conventional approach was examined and found to be wanting. The contemporary approaches have a more logical basis but the application of technique has a serious flaw in the analysis stage. While the conventional techniques require no subjectivity at the analysis stage of the valuation process, the contemporary models require a subjective choice of an equated yield, prior to calculation of implied growth rate and capitalisation rate. This choice of equated yield must be made regardless of whether the comparable is rack rented or reversionary. In the use of comparables, both conventional and contemporary techniques do not have any serious flaws when the comparison is perfect. To be perfect the comparison must not only be similar in locational and physical characteristics, but it must also be identical in lease structure, that is to say it must have the same unexpired term and rent received to CRV ratio. Where the perfect comparison exists, investment valuation techniques are irrelevant: direct capital comparison can take over. The debate regarding the use of techniques for market valuation must therefore revolve around the use and manipulation of non perfect comparables and the second part of this paper investigates the objectivity and logic of the application of technique to the valuation of reversionary freehold investments.

This paper introduces the real value approach. A second paper, to be published in the next issue of Journal of Valuation, considers specific applications of this approach.