Airport Valuation Principles Comment
Tuesday 13 August 2002
NZ Property Institute Comments On Airport Valuation Principles
The New Zealand Property Institute Valuation & Property Standards Board Chairman, John Dunckley, today commented on the The Commerce Commission Report which was released 5 August 2002.
This report challenged the established valuation principles currently adopted by the New Zealand Property Institute Members. It suggests historic cost as the basis of valuation for the assessment of complex specialised assets such as those held by airport authorities. Valuers currently use optimised depreciated replacement cost (ODRC) for these valuations.
Mr Dunkley said today,"The New Zealand Property Institute and its valuation members moved away from historic cost in the 1980's and to return to that basis of valuation would be against the international trends.
"The New Zealand Valuation Standards are aligned closely with the International Valuation Standards where the valuation of specialised assets must be completed on a depreciated replacement cost basis which in the modern definition reflects ODRC.
"Depreciated replacement cost is an assessment based on the replacement of the existing asset in its modern equivalent form to the actual level of capacity or service potential and is fully set out in the New Zealand Property Institute Standards.
"The land value under specialised and unique assets is also able to be determined by valuers who are competent and experienced in that particular industry.
"It would be considered a significant backward step should valuers be asked to report values based on their historic cost and would result in meaningless balance sheets with significant discrepancy between competing industries," Mr Dunkley concluded.