Issues in Cost Approach to Value in the Valuation of Income-Yielding Properties in Bauchi Metropolis, Nigeria

ABSTRACT

The cost approach to value stands as a crucial method in valuing income-yielding properties, yet various challenges can compromise its effectiveness, potentially leading to inaccuracies in property valuations. This study delves into the suitability of the cost approach for valuing income-yielding properties, with a specific focus on addressing issues related to the accuracy of cost data, depreciation estimation, and consideration of income potential, aiming to enhance the approach's reliability and accuracy. Data were gathered from Estate Surveyors and Valuers through a questionnaire, employing convenience sampling. The questionnaire, divided into three sections, utilized closed-ended questions on a 5-point Likert scale, with mean rating analysis applied to the data. The findings pinpoint challenges concerning data reliability, depreciation rates, and valuation guidelines. Strategies such as thorough property inspections, utilization of current cost data, market research, and regular updates emerged as key drivers for enhancing accuracy, transparency, and benefits for valuers. Addressing challenges within the cost approach not only improves accuracy and transparency but also positively impacts decision-making, market efficiency, and liquidity. Consequently, the study advocates for enhanced data collection, standardized guidelines, and professional training for Estate Surveyors and Valuers to bolster accuracy and transparency, thereby refining the cost approach method of valuation. In conclusion, this study underscores the importance of overcoming challenges inherent in the cost approach to establish a more robust and reliable property valuation system, ultimately benefiting stakeholders and the real estate market as a whole.