Annual Report 2023

237 2023 Annual Report Transport International Holdings Limited NOTES TO THE FINANCIAL STATEMENTS (Expressed in Hong Kong dollars unless otherwise indicated) 14 Investment properties and investment property under development (continued) (b) Fair value measurement (continued) The Group’s investment properties are valued using the income capitalisation approach by capitalising net income from the existing tenancies and reversionary income potential at appropriate capitalisation rates for individual properties. The capitalisation rate adopted is derived by making reference to the yields achieved from analysis of comparable property investment transactions and valuer’s view of prevailing investor expectations regarding rental growth and perceived risks. The Group’s investment property under development is valued using the residual method by estimating the value of the property when completed using income capitalisation method with reference to comparable sales transactions assuming that the property had been completed in accordance with the current development plan on the valuation date less the costs that will be incurred to complete the development with appropriate allowance for profit and risk. Set out below are the significant unobservable inputs used for fair value measurements: Unobservable inputs Range Investment properties in Hong Kong – commercial properties and industrial properties Capitalisation rate 3.50% to 4.75% (2022: 3.80% to 4.75%) Investment property under development in Hong Kong Capitalisation rate 3.50% (2022: 3.50%) The fair values of the Group’s investment properties and investment property under development are inversely to related capitalisation rates, which are determined by reference to investors’ expectations on investment yields, rental growth and the risk profile of the properties being valued. A lower (higher) capitalisation rate would imply a higher (lower) property value. Fair value adjustment of investment properties and investment property under development is recognised in the line item “Fair value change of investment properties and investment property under development” on the face of the consolidated statement of profit or loss.