Methods for Determining the Impact of the Temporal Trend in the Valuation of Land Property

The presented case study is to provide various methods of determining the impact of the time trend on the changes in transaction prices of undeveloped land properties. The basis for each property valuation is an analysis of the local market, where the valued property is located. This analysis lies in the implementation of activities related to determining the trend of changes in the prices of real estate and their update on the valuation date, as well as in determining the impact of the various attributes of a property on the formation of a unit transaction price. The valuer making a valuation of a property is required to take into account the changes in price which occur as a result of the passage of time. The price adjustment is done properly if all the changes in price during a certain period of time are taken into consideration. In order to determine the trend of transaction prices, one can use:

- a method of comparing property prices by similar pairs,

- linear and nonlinear additive models,

- nonlinear multiplicative models (e.g., in the form of a multiplicative exponential function, power).

The choice of the right method of updating transaction prices depends on the sample size adopted for the analysis of the real estate market. It is also crucial to select the right representative real estate database that best reflects the tested reality.

A practical and theoretical research method of the time trend was developed using undeveloped land property price data. An analysis of determining the impact of time on real estate prices has been presented using each of the above mentioned mathematical models.

The object of the study was the local market of undeveloped land properties, including sale and purchase transactions conducted in Stoczek Łukowski. A merit analysis of the methods used and a comparison of the obtained results have also been provided.