LIBRARY
Valuation Approaches & Methods
The recognised methodologies valuers use to arrive at a defensible opinion of value — and when each one applies.
Market Approach
Values a property through direct comparison with the market.
Comparable Sales Method
Direct comparison against recent sales of similar properties, adjusted for differences in location, size, condition, and timing. The most widely used method for residential property and vacant land.
Income Approach
Values a property based on the income it produces or is capable of producing.
Income Capitalisation Method
Converts a single period of stabilised income into value using Value = Net Operating Income ÷ Capitalisation Rate. See the Big Five Framework for a full breakdown.
Discounted Cash Flow Method
Projects multiple periods of future income and discounts them back to a present value at an appropriate discount rate — used where income is expected to change materially over the holding period.
Profit Method
Used for trading-related properties such as hotels, where value is closely tied to the business’s trading potential and profitability rather than the bricks and mortar alone.
📄 Related case law:
Cost Approach
Values a property based on the cost to replace or reproduce it, or derives land value from a development perspective.
Depreciated Replacement Cost Method
Estimates value as land value plus the cost of reinstating the improvements as new, adjusted for depreciation. Typically used for specialised or unique-use properties with limited comparable sales evidence.
Land Residual Method
Used for development sites and vacant land: estimated end value less development costs and developer’s profit, to derive the residual land value.
Choosing the Right Method
The right approach depends on the asset type, the purpose of the valuation, and the evidence available. Experienced valuers often cross-check a primary method against a secondary approach to test and defend their conclusion — a discipline at the heart of the Big Five Framework.