What is Fair Value?

Over the past two years, economic recovery has prompted a broad-based market recovery, as evidenced by higher investment and leasing volumes globally. In this environment, capital values are rising, due to a combination of inward yield movement and, to a lesser extent, rising rents. What does this mean for pricing? Is the market over-priced? What is fair value?

This research seeks to answer these questions and whether fair value has changed fundamentally with the advent of a more global marketplace, given the range of motivations of different types of international investors.

The research has used two methodologies, applying Shiller’s Cyclically Adjusted Price to Earnings ratio (CAPE) to UK property, for an historic perspective, and a forward-looking relative pricing model. These have been adapted to reflect the perspective of a safe-haven investor. With a longer time horizon and a desire to diversify assets under management across geographies and asset classes, the study estimates the extent of the premium these investors may be willing to pay over investors taking the traditional approach, looking to optimise returns over the short to medium term.

Return to listing