Different Traditional Methods for Land Valuation
Real Estate 229

Different Traditional Methods for Land Valuation

Different Traditional Methods for Land Valuation

One of the greatest challenges for any type of land value taxation system is to accurately value the land on a large scale. In urban areas where all real estate sales data represent transfers of land with improvements, it is very difficult to divide the price between land and building components.

However, many jurisdictions require a separate listing of land and building values on their tax rolls and these allocations will not affect the final tax bill if the tax rate is the same on both.

Although any special tax on land value along would increase the need to assign more precise land values to parcels that have been improved over many years. As a result, disbelief as to the practicality of this process has proven a major block to serious consideration of two-rate property taxes and other forms of special land taxation. Many people have concluded that the practical problems of land assessment prevent the realization of the many theoretical benefits that it has to offer.

Further, there are many advances in computerized approaches to land evaluation in Brisbane that have important implications for this debate. However, the land valuation presents special problems in the analysis of sales data for improved parcels, it can also benefit from location analysis and land value mapping techniques. Buildings can and will vary unpredictably in value from lot to lot, but land values for adjoining or nearby parcels should have a more constant relationship to one another.

Traditional Methods of Land Valuation

There are many standard methods of deriving a value for unimproved land, all extremely problematic as the basis for jurisdiction-wide assessment.

Comparable Sales

One method for land valuation is analyzing the sales of comparable unimproved land, adjusting the prices to account for any differences in size, location, and features.

Although these methods are difficult to apply in densely populated urban areas where sales or rentals of unimproved land are rare. If the sales of improved land are followed soon after, by the demolition of the buildings, the pool of sales data can be expanded.

In such cases, the unimproved land value can be estimated as the purchase price minus the cost of demolition of the property. Such sales generate an important check for estimated values produced by other approaches, they do not exist in sufficient numbers over a varied enough geographic range to serve as the sole basis of assessment.

Income Analysis

Another traditional method is the land residual method which begins with an estimate of the income yielded by the developed property. After that, the building value is calculated and from that, the income attributable to the building is derived. It provides value for the land after capitalizing on the remaining income.

The only problem is that a cursory description of this method suggests the difficulties of its applications. In particular, the existence of depreciation or any deviation from best use would distort the income available to be the unimproved land thus leaving the independent value of the improvements extremely uncertain.

Cost Analysis

Such problems also confront a division of value according to the depreciated reproduction cost of the improvements. Cost analysis is done to check that structures are not worth more than their initial cost of construction and assigns all remaining value in the improved parcel to the land itself. While the physical, economic or functional depreciation greatly complicates the attempt to calculate the value of the building. However, this method requires new construction whose price can be confidently estimated as a measure of value. While the financial effect of many different types of obsolescence can only be measured accurately going through the sales data which will never be available for the building alone.

Conclusion

Apart from these, the cost of development is also a traditional method for property valuation in Brisbane. If you want to get your property valued then contact Australian Valuers today!

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Real Estate 229