Critically discuss why The Cost Method of valuation is not appropriate for attaining an accurate reflection of the market value of a property./2022

Question 3

Yur client has instructed you to provide a valuation of a disused mill in Greater Manchester for insuroance reinstatement purposes.  He would also like to know the rateable value of the property.   The building was constructed in the 18th century and is 6 storey’s high on a floor plate of 7,700m2.  The building is situated on a site measuring 1 hectare.

  1. You are required to use the BCIS unit cost rate of modern materials (£1,009.00) to establish the costs per m2 and make any other relevant assumptions relevant to an insurance valuation. You are then required to ascertain the rateable value of the property at a yield of 5.5%.

For this question the following information has been given please put it in the correct format with the formulas  1st part of the question Cost of building= 7,613,914  apply the 90% to find the land value    

 

add the 1.5 million per hectar after detecting the 90%  so based on this the capital value will be 2,261,000 this is what its going to be worth and this is what it will be multiplied with 5.5 to get the rateable value = 124,376 

 

                                                                                                                                  (8 Marks)

 

  1. Critically discuss why The Cost Method of valuation is not appropriate for attaining an accurate reflection of the market value of a property.

                                                                                                                                 (12 Marks)