ABSTRACT
This chapter reviews the evolution of the income approach over time as it was developed by United Kingdom valuers in response to changing social, economic and political conditions, which impacted upon the market for property. By the nineteenth century valuers had to deal with freeholds subject to leasehold rights and with leaseholds. The profession took a little longer to recognise that if the capitalisation rate used in the valuation was held constant it would be the investment's expected internal rate of return based on current market rents. Historically, many term and reversion valuations were used to cope with the substantial reversions that occurred when the long leases could be seen to be coming to an end, and there was an expectation of a substantial uplift in rent. Dual rate methodology is no longer considered to be appropriate for the valuation of leasehold interests in property.
