Valuation in terms of economy

While carrying out the valuation process by Perth Property Valuers, there are certain ground rules of valuation which are applied by the valuer. Another issue associated with joining the euro, is how interest rates would converge with those in the euro area. If the Bank of England (BoE) continued to set interest rate policy in line with domestic economic conditions in the run-up period to entry, a positive interest rate differential between the euro area and the UK would still exist come the entry date, and hence a step reduction in rates would have to occur.

The economic rules such as anticipation, assurance, supply & demand, usage of the property, and contribution are taken into account. The future value is calculated through anticipation, similar type of building structures are targeted for valuation. That it gradually eliminated the interest rate differential with euro area in the run-up period to entry. This could lead to higher inflation than would have otherwise been the case though.

If the BoE were to continue to target inflation in the runup period, the objective might be changed to that used by the European Central Bank (ECB), which aims for inflation of not more than 2%. Furthermore, the targeted measure of inflation, currently RPIX, would probably switch to the HICP measure which is used in the euro area.

The value of the property increases according to the area in which the building is situated. Also, the most used property stands the highset in terms of valuation. Also increase in the contribution and investments in the property increases the valuation. While the HICP measure of inflation in the UK is below 2%, if the UK made a decision now to join the euro in two years time, interest rates need not fall sharply, as the recent decline in sterling will put some upward pressure on goods prices, and hence inflation.

Whatever strategy were chosen, interest rates are likely to be lower than if the country stayed out of the euro. The housing market and joining the euro The first of the government’s five economic tests on whether or not the UK could join EMU is whether the UK economy is cyclically converged with the euro area economy.