A critical examination of income approach to valuation models

Abstract

The grasp of valuation principles raises the consultant estate surveyors and valuers above the non-professional practice of agency and brokerage. So much of our national wealth is consolidated in real estate assets that the property valuer has a duty to contribute his expertise to efficiency in the use of scarce resources. Valuers should estimate the worth of a property to an investor and not the selling price of a building. Valuation should be a basis for investment counseling rather than sideline property from the main streams of investment world. This paper examined income approach to valuation models. These were examined by identified various valuation approaches (Traditional/Conventional) and alternative valuation models(Contemporary valuation approaches). The purposeful method of data collection was adopted and data were sourced from Estate surveyors and valuers. Data were analyzed through the essential parameters involved in both conventional and contemporary approaches. Findings reveal that contemporary models, apart from producing results which are rational, defensible, and can be analyzed in line with other investment media, the use of conventional models tends to over-value the property particularly for investment properties. Conclusively no valuation model is absolutely accurate, but continued advances in valuation principles are answering client’s increased demand for more specific input in the valuation process and helping clients had better understand how real estate value is estimated under different scenarios.