Essay Example on Colliers International 2017 pointed out the national economy of Australia

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As Colliers International 2017 pointed out the national economy of Australia is expected to enjoy its twenty sixth year of stable economic growth and may continue from 2018 to 2028 It believed that population growth reviving tourism lower interest rates and exchange rates are promoting property market meanwhile driving a large number of investors to invest in retail property However real estate investment is a much more complex area because there are many different types of property investments including industrial retail and residential property Peng 2008 As well as this different investors usually involve commercial property in their core investment portfolios for income oriented returns and stability particularly in low risk traditional property sectors like retail property According to Peng 2008 Australian investors have an increasing demand for good quality or high yield retail properties Furthermore retail property rents for the major Australian cities of Sydney and Melbourne enjoyed yields of 7 3 per cent and 7 9 per cent respectively at the third quarter 2017 JLL 2017 As such there has been a strong interest in the retail property by investors in Australia with the core retail property specific drivers such as stable income stream high rental yield and low vacancy 



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Furthermore the retail property has been a significant property investment sector in Australia investment market in recent several decades as well 2 0 Valuation Methodologies in Retail Property As more investors have strong interest in investing in retail property estimating the value of new retail properties has been most important for potential investors because the property valuation can help them to know the value of an investment property Anon 2017 He pointed out that investors are likely to know how much rent to charge or how much to pay in taxes when they know the value of investment property Then they can ensure whether they have opportunities to invest in this property Therefore in this section this essay will explain several common valuation methodologies valuers use when valuing retail property namely discounted cash flow direct comparison and income capitalisation approach Typically valuers must employ at least two valuation methodologies when estimating the value of retail property because valuers need to check the result of valuation they arrived at using the primary way by applying another valuation method Australian Taxation Office n d 2 0 1 Discounted Cash Flow The first common approach to discussing Discounted Cash Flow It always used for valuation of larger retail property such as shopping centres Also discounted cash flow is used to value the attractiveness of an investment opportunity Additionally valuers need to estimate discount rate through analysing recent comparable sales and survey the investor sentiment firstly According to Thode and Levine 2017 discounted cash flow approach estimates the future cash flows to the owner of the property and discounts these cash flows to the present to estimate the property's value Then valuers can compare the present value arrived at through discounted cash flow analysis with the current cost of the investment If the present value is higher than the current cost of investment the investment opportunity may be good for investors 



Thus discounted cash flow analysis can help investors to ensure whether they should invest in this property 2 0 2 Direct Comparison Approach Direct comparison approach is a common valuation approach whereby the property is compared with similar properties that offered for sale rented or have been sold This approach is most suitable for the valuation individual and small retail properties Usually valuers need to confirm comparable properties through comparing with different location areas marketing conditions as well as prices Through this method valuers can confirm the comparable sale price per square meter and rental yield in the current market and using this information to calculate the range of the properties sale price 2 0 3 Income Capitalisation Approach The final approach of the retail property valuation is the income capitalisation approach This method to appraisal assigns a property value based on the estimated returns of property The capitalisation rate is connected to the net income decided through an investigation of comparable property exchanges Sometimes valuers require to adjust some sale evidences to determine the most appropriate rate to employ to the subject property such as the ability of property to grow its income quality of improvements and impact of future competition In summary these three valuation approaches are the most commonly which used in estimating the value of investment property

Also they can help investors to calculate the cost of investing in the property and analyse the investment feasibility Moreover investors not only need to know the value of investment property but also should realize the depth and nature of retail property investments 3 0 The Depth and Natural of Retail Property Investment As well as this there is various of information that are requiring valuers to research when making investment decisions on retail property investment expect for knowing the value of investment property According to Reddy and Wakefield 2014 investing in traditional commercial property can be a quite profitable venture particularly in low risk real estate sectors such as retail property They stated that many commercial spaces have the potential to bring in much more funds than other investments However it is extremely significant to make a thorough property investment analysis beforehand There are several key factors that will confirm whether investor's investment can be rewarded with high profit and stable income returns such as location potential income and zoning laws


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