Property Valuations are More Obscure as Comparable Sales Availability Diminishes

Traditionally, comparable investment sales play a big part in the determination of property values by appraisers, in contrast to lenders that focus more on “debt service coverage ratio, a measure of whether a property is bringing in enough money to make its debt payments.” However higher interest rates and a sizable gap between the expectations of buyers and sellers led to a lowering volume of sales transactions, thereby increasing appraisers’ difficulty to put a price on real estate and increasing already existing subjectivity of predicting things like income, occupancy, and economic cycles. Heightened uncertainty has shifted investors’ interest away from offices assets “and instead to more stable asset classes such as top-of-the-line apartment buildings and warehouses, whose valuations are clearer.”

Source:    https://therealdeal.com/new-york/2023/11/16/real-estate-valuation-uncertainty-cripples-dealmaking/