Valuation of Properties and Economic Models of Real Estate Markets

Appraisals should assess the market value of properties and are necessary for buying, selling or building decisions, for lending and for taxation. Despite this unambiguous task different techniques exist for ascertaining market values. An valuation approach should be in accordance with economic theory and should generate appraisals, which are reliable estimates for transaction prices. This dissertation analyzes the three most important valuation approaches, i.e. cost, sales comparison, and income approach, shows the underlying market models and evaluates the valuation techniques that are codified in the German Regulation on Valuation (WertV). For the latter evaluations, appraisals are compared with observed transaction prices. In addition, the dissertation gives an overview on real estate price indices and on the hedonic approach. Extensive data on Berlin’s real estate market are used for the econometric analysis.