The 3 internationally defined valuation approaches, as defined in the Glossary (both in IVS 2014 and also in RICS Red Book 2014) are the market approach, the income approach and the cost approach. These valuation approaches are easily identified from their basic principles:
- The market approach equates to the comparison method of valuation.
- The income approach generally refers to the investment method – either traditional (cap rate) or discounted cash flow (DCF) - or can refer to the profits method.
- The cost approach is often taken to refer to the depreciated cost method of valuation but can equally be applied to use of the residual method for valuing properties with development potential.
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RICS standards and guidance
- RICS property measurement
- UK commercial real estate agency
- New rules of measurement
- QS and construction standards
- Residential property standards
- Valuation standards
- List of RICS standards and guidance
- RICS standards and guidance archive
- Introduction to valuation approaches
- Market or sales comparison approach
- Income approach
- Profits method
- Cost approach
- The residual appraisal method
- Discounted cash flow
- Further considerations on valuation approaches adopted