The Improved Net Rate Analysis

This paper proposes an improved net rate methodology to use the assessed land values to proxy the land contribution in real estate appraisals. The assumption in the method is that neighbourhood effects are capitalised into uniform land assessments. Compared to the traditional sales comparison approach, the method has potential to extend the selection of comparable properties. Simulations based on the theoretical and empirical data suggest the method benefit greatly from compensating for assessment errors. Since more sales can be incorporated into the proposed method, it is contended the appraisal result will be more objective and accurate. In practice, the method provides an attractive solution for property valuations in areas where there are limited sales.