«Discounting is the biggest crux of real estate valuation» is written in a textbook on real estate valuation. The «crux» lies less in the fact that there are no approaches or starting points for the logical derivation of discount rates, but in the scarce availability of information. In the end, there is no approach that does not require at least one assumption to be made. The only solution is the well-founded estimation of this remaining assumption, the control or plausibility check by means of control calculations as well as the transparent presentation of the approach and the assumptions. Given this background, FPRE has described its in-house discounting model in the Real Estate Almanac Switzerland 2018:
Close to the market
Current market data provide the basis for the quarterly update of the discounting model.
- Transaction data from investors
- Public transaction data
- Bank data
- Generalization with FPRE Ratings
Synthetic surcharge model
FPRE always calculates net and focuses on the surcharges to derive the net interest rate.
- Real estate surcharge
- Macro location
- Micro location
- Rental agreement structure