Value in the Cost Approach

• Autorzy: Ewa Kucharska-Stasiak
• Języki publikacji: EN

Abstrakty

EN

The term "valuation approach" denotes the method used to determine value, or, the analytical procedure applied. Economists distinguish different valuation approaches. The first to use this term was Alfred Marshall, who lived at the turn of the 20th century. He described the sales comparison approach, the income capitalization approach and the cost approach. The first two approaches were meant to estimate the market value of real property while the cost approach was employed to determine its reproduction value. The methodology of valuation is by no means fixed and constantly evolves, which is reflected in each approach. For example, the income capitalization approach used to be based on a model of constant, perpetual income flow. In the 1960s, after tangible assets, including real estate, became part of investment portfolios, valuers gradually started to use variable income flows for the assumed period of analysis. The cost approach has also evolved. Traditionally, it was used to determine value corresponding to the so-called phase of production, i.e. reproduction value representing the cost of purchasing land and constructing buildings less the degree of their depreciation. In the United States, as a result of a prolonged debate whether the above definition was a description of value or of valuation methodology, the cost approach was recognized as a surrogate for market value. This was sanctioned in the seventh edition of the International Valuation Standards, where the term "reproduction value" ceased to be used (IVS 2005). Along with the sales comparison and income capitalization approaches, the cost approach was adopted as a market approach to valuation. Each approach may also be applied to determine values other than market value (IVS 2005). Furthermore, the validity of the cost approach for estimating market value has also been recognized by TEGoVA (EVS 2000, 2009). (fragment of text)

Słowa kluczowe

EN

Real estate valuation; Real estate's value; Value theory

PL

Wycena nieruchomości; Wartość nieruchomości; Teoria wartości

• Czasopismo: Studia i Materiały Towarzystwa Naukowego Nieruchomości
• Rocznik: 2011
• Tom: Selected Aspects of the Cost Approach in Property Valuation
• Strony: 17--24

Twórcy

autor

Ewa Kucharska-Stasiak

Bibliografia

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