Assessing the Spatial Variability of Capitalization Rates

Abstract

The capitalization rate is a critical indicator that is used extensively for property valuation in the real estate sector. This study assesses and compares the spatial variability of the capitalization rates in two distinct areas: an urban and a rural area in South Korea. The capitalization rate is confirmed to be stable for the urban area, but the rural area shows significant spatial variations. These findings suggest that researchers should test the existence of a stable capitalization rate as a prerequisite before proceeding to investigate other relevant issues in real estate. The approach in this study is recommended for use in real estate practices such as property valuation and investment decisions.

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