Overview

This research paper is largely concerned with the analysis of property yields and from its pages a reader may discover much of their conceptual nature and a little of their history.  Property yields and their terminology are interesting and can be confusing.  E.g., initial yields, equivalent yields, all risks yields, cap rates, terminal yields, inflation risk free yield, internal rates of return (IRR), discount rates, target rates of return, weighted average cost of capital (WACC), yield to maturity, equated yields, blended yields, moving yield, reversionary yields, exit yields… There is a knowledge gap in the New Zealand valuation profession surrounding their meaning where they are conceptually, poorly understood.  

In particular, equivalent yields vs all risks yields (capitalisation rates) are a source of confusion.  

An exploration into these issues will clarify the difference between equivalent yields vs all risks yields and their impact on the commercial property market.  The focus of attention is the assumptions implicit in property yields.    

Analyses are shown, examples are illustrated and comparisons made to give the reader an excellent overview of the different techniques in use today.