Price as a Measure of Market Value on the Real Estate Market

Abstract

Issues related to the relationship between prices and values of goods have occupied the minds of economists since the beginnings of economic thought. These considerations concern both general issues and the direct, practical dimension of values. For the real estate market, the main value category considered and used is market value. Its concept has been defined at different levels of legislation, but regardless of how detailed the content of the definitions, they all refer to price as the main basis for reasoning. On the other hand, a part of the economic trends call into question the possibility of measuring values directly on the basis of prices. Consequently, in the light of existing divergences in interpretation, can prices be a good yardstick for value, particularly in the light of the evolving concepts of Highest and Best Use (HaBU) and Hope Value? In an attempt to answer the question, the paper presents considerations on the relationship between prices and value on the real estate market, in particular in the context of the significance of this relationship for the determination of market value. Theoretical studies were supported by empirical research, which allowed for disproving the research hypothesis concerning the relations between the analyzed economic values.

Keywords

• transaction price
• market value
• market characteristics
• property valuation