The Comparative Suitability Of Property And Environmental Valuation Approaches In Valuation Of Specialized Property Without Trading Potential

PURPOSE: in the valuation of specialized property without trading potential, the property valuation approach is that market or existing use value is taken as equating to reconstruction costs modified by deductions for physical deterioration and functional/economic obsolescence. However, market value is determined by the interactionof the economic forces of supply and demand, not supply alone. The purpose of the paper was to compare the suitability of property and environmental (contingent) valuation approaches to the valuation of specialized property for the purpose of determining whether a paradigm shift is necessary in valuation practice.DESIGN/METHODS FOLLOWED/APPROACH: The approach was to draw conclusions from an analysis of three indicators of suitability: the comparative rationality of the basis and methods of the two approaches; their likely comparative accuracy; as well as their comparative practical ease of use in application to specialized property.FINDINGS: The analysis concluded that environmental (contingent) valuation approaches were more suitable for specialized property valuation as they were more rational and more capable of producing accurate results, though less easy to use.RESEARCH LIMITATIONS/IMPLICATIONS: Contingent valuation approaches are subject to certain limitations and practicality suggests it might necessary to take them together with the usual cost approaches. The paper suggested that a paradigm shift towards such combined usage is necessary in specialized property valuation practicePRACTICAL IMPLICATIONS: Contingent valuation approaches deserve to become part of standard specialized valuation training and practiceORIGINALITY/VALUE OF WORK: The paper has value in stimulating more rationality and accuracy in specialized valuation practice.