Valuation accuracy: A contribution to the debate

Summary The issue of valuation accuracy is important for property professionals and investment analysts. The issue of accuracy and the methodology for assessing it has been the subject of recent academic research and debate. This paper focuses on three main areas related to the topic of valuation accuracy. Firstly, it examines some of the methodological problems and concerns of attempting to assess the relationship between prior valuations and subsequent transaction prices. Secondly, previous empirical research on this topic is critically examined. Academic critiques of previous empirical research are reviewed. Finally, a sample of property transactions is analysed in order to assess the relationship with the previous valuation. It is concluded that the empirical investigation of valuation accuracy is fraught with methodological problems. Moreover, it is tentatively concluded that there is likely to be an element of error in the valuation process but that it is unlikely that valuation bias is significant.