Managing Uncertainty in the Portfolio

Not only the present risks, the future risks and elements of uncertainty as well must be considered in a property valuation. It is important to remember that the buyer is unable to outsource the risks of price changes as there are no futures markets for direct property investments. The buyer or landowner consequently needs to consider the following elements of uncertainty:

  • General property price risks
    • Property market trends
    • Property price fluctuations (property clock)
    • Immigration / emigration of foreign staff and / or relocation of company
    • Change to the credit market / amortisation risk
  • Individual property price fluctuations
    • Improved attractiveness or diminished attractiveness of the location
    • Non-zoning / re-zoning
    • Use restrictions
    • Positive or negative management trends
      • Expenses
        • Higher management costs
        • Maintenance and renovation
        • Higher taxes
      • Returns
        • Rent increases / rent reductions

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