and after all it’s the income approach ultimately especially when you consider it a little bit broader than simply in dollar terms that is responsible for the desirability of owning property in the first place Gold Coast Valuer another point which is made in the study guide is that land like money is not capital even though
in our part of history we often refer to both money and land as capital and we go into the history of that confusion in the study guide one of the odd things about the fact that these two very important and valuable things in our society are not capital strictly speaking is the curiosity of where yield rates come from and for that matter interest rates and their relationship yield is the ratio
between the income as rent divided by the value of the land so yield as a simple percentage and it’s this ratio of the rent divided by the capital value and in some ways it’s similar to the interest rate on money in that the interest payment you receive divided by the principal of a deposit or a loan gives you the rate of interest both of these rates ultimately are mysterious we don’t exactly know where they come from they don’t have some logical or scientific basis we can observe them as being present but they’re present more as a social artifact in other words something which is simply a product of the doings of society not as something
that comes up as a result of some quantum of labor or quantum of something which is quantifiable and this gives rise to what is a ongoing question both in economics and in property valuation and that is what is the appropriate rate of profit rate of interest and in property yield to apply when you’re going from a rental value to a capital value and in the study guide we look further at the similarities and linkages between money and land this is very important because money and land are linked in our world and especially since if interest rates fall just give a little bit of thought to what that does to the price of property there’s land and money
are very very important assets in our economy let’s move further now and look property as an investment if we’re looking at getting into the mind of the most likely purchaser which after all is where the valuer must delve to find the answer to the valuation problem what we find is that property