Who Decides the Value of a Property, and How It Is Decided

How Property Value Is Decided

Valuation is both art and science. Professionals use structured methods, but intuition and local experience also matter.

1. The Comparative Market Approach

This is the most common method for residential and land valuation. It compares the property to similar ones recently sold in the same area.

For example:
If three similar plots in Moniya recently sold for ₦1.8M, ₦2M, and ₦2.2M, the average market value of a similar plot would be around ₦2M.

Valuers adjust for differences such as plot size, terrain, accessibility, and proximity to amenities.

2. The Cost Approach

This approach is often used for new developments. It determines value by calculating the cost of acquiring the land plus construction and improvements, then subtracting depreciation.

In simple terms:
Value = Land Cost + Building Cost – Depreciation

It’s useful for developers setting prices on new estates or renovated buildings.

3. The Income Approach

Used mainly for commercial properties, this approach values a property based on its income potential.

If a building generates ₦5M annually in rent and similar assets yield a 10% return, then its estimated market value is ₦50M.

Formula:
Value = Net Income ÷ Capitalization Rate

This helps investors gauge how much an asset should cost relative to what it earns.

4. The Residual Method

This is often used by developers assessing undeveloped land. It calculates how much profit can be made after development, factoring in projected sales and total costs.

For example, a developer estimates ₦100M sales revenue after building, minus ₦70M in costs — leaving ₦30M as profit. The value of the raw land would then be based on how much it contributes to that return.

Factors That Influence Property Value

Every property is unique, but several universal factors influence its worth.

1. Location

This is the golden rule. Land near business districts, highways, or schools naturally commands higher prices. Even within the same area, plots closer to main roads or corner spaces may be worth more.

2. Infrastructure

Road networks, drainage, and electricity supply add immense value. When government or private developers improve infrastructure, nearby land appreciates rapidly.

3. Neighborhood Quality

Clean, organized, and secure communities attract higher-paying buyers. Estates with gated security, paved roads, and consistent maintenance can double in value within a few years.

4. Demand and Market Trends

When an area becomes trendy — as seen recently in Apata and Alakia — increased demand pushes prices up.

5. Land Documentation

Proper titles such as Registered Survey, Deed of Assignment, or Certificate of Occupancy (C of O) increase value significantly because they reduce legal risk.

6. Size and Shape of the Plot

Regularly shaped plots (rectangular, level) are easier to develop and therefore more valuable.

7. Future Potential

Sometimes value lies not in what’s there today, but what’s coming. Government layouts, new highways, or proposed industrial zones can cause future spikes.