AN EXAMINATION OF CHALLENGES OF COST METHOD OF VALUATION IN LAGOS METROPOLIS, NIGERIA

Abstract

The process of estimating value of interest in real property involves the application of traditional valuation methods. One of the methods is the depreciated replacement cost. In the process of applying this method which most valuers find convenient to use, certain problems emanate. The study aims at assessing problems associated with cost method of valuation in Lagos Metropolis. The sample of population used for the research consists of 98 estate surveyors in Lagos Metropolis. Survey method was applied for the study. Data were analysed using descriptive and inferential statistics. Findings revealed that sales/direct comparison, depreciated replacement cost and income capitalization methods with means of 4.36, 4.29 and 3.64 in that order are the most strongly applied methods used for estimating real property in Lagos Metropolis. All the six listed steps in applying cost method recording means of between 4.57 to 5.00 are strongly and consistently endorsed. Estimating replacement cost, deducting depreciation/obsolescence and addition of land value are strongly recognized. The most serious problems associated with cost method are integrity of valuation surveyors, complexity in applying depreciation, inaccurate measurement, uniformity of construction costs, equating cost with value and understanding of architectural drawings with means of 4.57, 4.50, 4.43, 4.43, 4.29 and 4.14 in that order. The study recommends organization of capacity for valuers.