Valuation

Question 1

When would you use the Depreciated Replacement Cost (DRC) method?

Answer 1

The DRC method is used to value specialised property where there is no active market.

Question 2

List some examples of the types of property valued by the DRC method?

Answer 2

• Schools
• Libraries
• Hospitals
• Power Plants
• Sewerage works

Question 3

What is the methodology for the DRC method?

Answer 3

1. Estimate cost of construction
2. Adjust for age and obsolescence
3. Add Land Value
4. Stand back and look

Question 4

What is the contractor’s basis of valuation?

Answer 4

When valuing for rating, the DRC method if referred to as the contractor’s basis

Question 5

What are the steps of the contractor’s basis?

Answer 5

1. Estimate the cost of construction
2. Adjust for age and obsolescence
3. Add land values
4. Apply statutory decapitalisation rate
5. Stand back and look

Question 6

What is the statutory decapitalisation rate when using the contractor’s basis?

Answer 6

2.6%- education, healthcare, defence
4.4%- other properties