The Investigation Of Income Approach In The Appraisal Of Commercial Housing

After several years of rapid development, Chinese commercial housing market has a massive scale. Business, related to commercial housing’s sale, assignment, investment, mortgage, is very frequent. All of these transactions ask for commercial housing value assessment. Nowadays, market approach is the major method to assessment, but it means real estate is a main weakness. Income approach is seldom applicated in the appraisal of commercial housing, while it is the major method in abroad. As soon as possible to amend the income approach and establish relevant data collection system, making the amended income approach adapt to the domestic commercial housing market has great significance. This paper aims to amend the three main parameters of the income approach, so as to make it operational.In this paper, the market method is integrated into the income approach to obtain three parameters, and with the addition of actual economy’s influence, the three main parameters are discussed to make it more scientific. The amount of income from the income approach comes from the market, but economic changes in the future are not considered. The revised income amount in this paper adds the impaction of the economic changes and the influence of the public expectation. After the modification, developing trend of the commercial housing is the measurement of the economic changes because the trend has sustainable ability in some level, and it seldom changes sharply. The price per unit area can explain the industry’s development trend. CPI can be used as a measure of the public expectation. CPI includes people’s daily goods and services. It is the most accessible changes about the goods’ price for people. By this parameter, people have a sensibility about the value of money. So, people can make a prediction about the amount of income. When calculate the interest rate, use the safe interest rate plus the adjusted interest rate, meanwhile, considering the promotion of the domestic marketization of interest rate, this reform will inevitably affect the banks and other financial intermediaries, and it will affect the commercial housing market in row. This is an angle to discuss the interest rate. Period of return is the most serious distorted parameter in the income approach. The demand in the commercial housing market is transferred from the rigid requirement into investment requirements. More and more people purchase commercial housing for investment, and sell it when they can make profit by housing appreciation. So, the period of holding the commercial housing is not according to the law. Here in this paper, commercial housing is divided into two types: one type is commercial residential building. Here we introduce the conception of second-hand-house-turnover rate to use this rate to calculate the period of holding the commercial housing, so as to provide a return period of commercial housing. Another type is commercial office building. Office building diverses a lot from each other, so related trading activities is limited. Therefore, we use the contract period as a return period.Based on the real case, the commercial housing is appraised by three approaches, which are market approach, income approach and the income approach examining economic factors this paper introduced. The evaluation result comes from a appraisal firm, which is fair. The result is the standard to compared with by other two approaches. By comparison, the result of income approach is far less than the standard, while the result of income approach examining economic factors is close to the market approach, and a little bigger. Considering actual information of the under evaluation of commercial housing, the result of income approach is false obviously.