Determinants of property value and features of its valuation under conditions of full-scale war

Abstract

The article establishes that existing theoretical and methodological approaches to property valuation do not correspond to the current conditions in Ukraine, which are characterized by a high level of uncertainty, destruction of active markets, limited or absent relevant market information, and significant risks associated with full-scale warfare. The lack of insurance coverage for war-related risks further increases uncertainty in value formation and necessitates the explicit incorporation of such risks into the valuation process. Under conditions of active hostilities, property is subject to damage and destruction, which leads professional market participants to address two fundamentally different tasks regulated by distinct legal frameworks and pursuing different objectives: market value estimation and compensation (damage) valuation. The study substantiates the need to adapt classical valuation approaches to the specifics of a crisis environment shaped by identified war-related risks. Particular emphasis is placed on the necessity of adjusting each of the classical approaches, comparative, cost, and income,by incorporating specific factors such as regional security conditions, demining requirements, relocation costs, infrastructure losses, and additional expenditures associated with wartime disruptions. It is concluded that the income approach, being the most sensitive to macroeconomic instability and risk factors, requires careful consideration of future income scenarios. In this regard, the application of sensitivity analysis and scenario analysis is recommended, with the development of alternative forecasts (pessimistic, baseline, and optimistic), each reflecting different levels of risk and uncertainty. To systematize the features of various valuation approaches, the article generalizes the differences between traditional methods and their modified versions under wartime instability. It is emphasized that, in order to enhance the reliability of valuation results under conditions of elevated risk, it is advisable to apply multiple approaches simultaneously and to synthesize the obtained results.