RSI Rent to Sale Index

Index is developed by SavvY Valuation team. SavvY Valuation is a Valuation Division at SavvY and provides services in two primary areas: valuation of tangible and intangible property in accordance with International Valuation Standards (IVS) and management of registrar of property, plant and equipment. The idea of developing an index was based on the lack of analytical data about real estate market. Regardless the existence of certain researches within the area, the segment of the market is insufficiently studied. Every new analytical data simplifies ability of getting a clue about overall concept in terms of ongoing market position.

This index, as well as any other aggregate amounts, certainly, cannot describe detailed conditions on market. However it enables to have a clue about overall concept. Index, specifically, represents a ratio of weighted average lease rental and weighted average selling price of commercial property. Which, in substance, is a estimate of the capitalization rate. As a result of interpretations, this relationship provides general information about what time will be needed for the settlement of the nominal amount required for purchase, according to the lease arrangement, or which is more beneficial while selecting between lease and purchasing.

Index reflects the conditions for IV quarter of 2018 and will be updated quarterly. In calculating the index, used data is a result of processing information placed on major digital platforms, exercised for real estate offer. Specified aggregate is calculated based on data about more than 5 000 unique market offers, which, in substance, is selected by eliminating duplicated units from up to 6 500 units. At the same time, units beyond the point of essential jump of string in ascending order, are not considered in calculations. Essential jump is considered to be a difference of 29% or more between the value of “N” sequential number and the value of “N+1” sequential number. Derived index from research results, in case of Vake and Saburtalo are 0.0989 and 0.1096 arbitrary units, respectively (Rent to Sale Index – RSI). Expansion of those territorial units, for which the index is calculated, is planned in the future.

Index is valid in terms of following assumptions:

  • Expected share of discount is identical for property offered for sale or rent, regardless the location, space and floor;
  • Other things being equal, inflation growth of offered price Is identical for property, offered for sale or rent;
  • In case of property for rent, idle time is nil;

In the field of changes in lease and selling price, index will provide punctual information, about general tendencies on market, to every interested party. Index will be interesting especially for parties operating in real estate sector, as well as business units that need to make decisions about purchasing or entering into lease arrangements for commercial spaces, with sufficient frequency.

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