Surveying & Built Environment Vol. 22 Issue 1 (December 2012)

about comparable properties and
supplement it with information from
conveyancing documents, if it is readily
available. Then, they either simply use
the capital value of the comparable land
without adjustments or they decapitalise
the land value of the comparable
property to its annual equivalent using
an ‘appropriate rate of interest’. The
resulting figure is recapitalised for the
term of the subject land. The resulting
figure is deemed the land value.
To obtain PV, the land value is added
to NRC as described in Equation 2.
Then, even though cost is used as
proxy for value, they adopt the general
assumptions underpinning market
value, namely that:
a) There is a willing seller;
b) Prior to the date of valuation,
there had been a reasonable
period for the proper marketing
of the interest, for the agreement
of price and terms, and for
completion of the sale;
c) That the state of the market,
level of values and other factors,
as on an earlier assumed date of
exchange of contracts, were the
same as on the date of valuation;
d) That the property will be freely
exposed to the open market and
that no account will be taken of
any price that might be paid by a
purchaser with a special interest;
e) Both parties to the transaction
had acted knowledgeably,
prudently and without
compulsion (For a discussion,
see Johnson et al., 2000, pp.
404-405 for discussion).
These assumptions are strange, given
that the valuers have to guess what
happens in the real estate markets,
Surveying and Built Environment Vol 22, 37-60 Nov 2012 ISSN 1816-9554
leading to questionable judgments, such
as the choice of capitalisation rates
(Ezaah, 2007). Mends (2006, p.10)
has even suggested that the opinion
of valuers in Ghana is not reliable.
Consequently, there is a general
perception that valuers are ‘magicians’
or ‘value inventors’ in Ghana (Ayittey
et al., 2006).
Nevertheless, given that valuation is
an art; not a science, it may be argued
that most aspects of the process of
estimating value in Ghana are justified.
The valuers have tried to adapt the
normative theory underpinning the Cost
Method of valuation to the extremely
difficult circumstances in which they
find themselves. These tensions and
contradictions do not mean that there is
no information at all in the real estate
market in Ghana such that only the
Cost Method of valuation can be used.
Indeed, as suggested in Table 1, there
are some cases where there is sufficient
market information to allow valuers
to use other methods of valuation,
such as the Market and the Investment
Approaches. Rather, the pervasive
problem of asymmetric information
implies that, unlike in developed
economies with relatively developed
real estate markets, the Cost Approach
is the norm in Ghana, while other
approaches constitute exceptions.
Given that little or no litigation
is reported in the popular press,
professional meetings, academic
lectures or conferences about legal or
professional challenges to the use of
the method, it may be inferred that the
valuers have been successful. Also,
it seems that, generally, clients are
satisfied with the work of most valuers
in Ghana (Obeng-Odoom and Ameyaw,
2010; Obeng-Odoom and Ameyaw,
SBE
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