Comparative Market Analysis
A Comparative Market Analysis analyses the sales of comparable properties and market-related data and establishes an estimated value by comparing the property and sales information. This method has been held as the most reliable and accepted by South African courts.
Income Capitalisation Approach
The Income Capitalisation Approach is a comparative valuation approach that considers the income and expense data relating to the property being valued and derives a value through a capitalisation process. Information such as rental rates, expense ratios, yields, capitalisation rates, leases and risk are carefully scrutinised ensuring a valuation is derived from the capitalised nett income.
Depreciated Replacement Cost
This method calculates the current cost of replacing an asset with the current asset equivalent less relevant deductions based on physical deterioration, obsolescence and other factors which may influence the outcome of the present value of the asset. This is appropriate when very little to no information is available relating to the asset or asset class being appraised / valued.
The Residual Approach refers to the estimated amount that an entity would currently obtain from the disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. This method is widely used by developers to determine the value or bid amount for a tract of land with development potential.
The Profits Approach is also sometimes referred to as the accounting method. This approach states that the rental amounts and capital values of assets are usually influenced by the potential to generate profit. Therefore, profits can be used as a basis to determine the value of a property.