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Property values and regional economic vitality: Valuation methods as an indicator of property market behaviour
Excessive property values contribute a depressing effect on regional economies. Excessive prices are those that are significantly out of alignment with underlying economic value, understood as either utility or contribution to productive activity. Identification of excessive values is difficult in an environment where market price and underlying economic value have been conflated into the term 'market value'. Sustainable management of urban and regional economic issues requires the identification of these misalignments and the pursuit of policies aimed at encouraging their correction. Property valuers are specifically trained in the estimation of price and value, where price is the sum the property will transact for in the near future, and value is the economically sustainable price. Markets that have developed price structures above value are unsustainable. Property valuers are well placed for identifying unsustainable price trends. Moreover, the methods adopted by property valuers to forecast market prices themselves are signals of changes in community attitudes to property. This paper employs a critical literature review and observations to examine emerging approaches to valuation practice to inform an understanding of community attitudes to real estate and its value. From this, observations will be made regarding dysfunctional attitudes that are at least contributing factors to a range of local economic and social problems. Finally, policy implications will be suggested. This study found that recent changes in both urban and regional property valuation suggest that communities have changed their perception of property in a way that is susceptible to the formation of unsustainable price bubbles. Valuers have increased their use of income approaches in response to the belief that buyers have become more likely to buy property for its income and growth potential rather than its utility in use. This would not be problematic if growth expectations were sustainable, however, there appears good reason to believe that future property growth will not follow the strong trends of the past.