ESM 302–Principles of Valuation
COURSE PARTICULARS
Course Code: ESM 302
Course Title: PRINCIPLES OF VALUATION
No. of Units: 3
Course Duration: Two hours of theory and one hour of tutorial per week for 13 weeks.
Status: Compulsory
COURSE INSTRUCTORS
Mr.A. O.Adewusi
ESM Departmental Office
Dept. of Estate Management
Federal University of Technology, Akure, Nigeria.
Phone: +2348135631484 Email:aoadewusi@gmail.com
and
Dr Kolawole C Ijasan
ESM Departmental Office
Dept. of Estate Management
Federal University of Technology, Akure, Nigeria.
Phone: +2348059876903Email:kcijasan@futa.edu.ng
COURSE DESCRIPTION
This course intends to provide an introduction to property valuations principle. The general
approach adopted is a combination of theoretical explanations and practical examples. The
intention is to discuss the context of the market, show how valuation practice has developed
within the context and explain the application of valuation methods in practice. This course
covers 5 main areas of study:
1. Conventional freehold and leasehold valuations
 Term and reversion
 Hard core and layer
 Equivalent yield
 DCF Approach
 Leasehold valuations (Single and dual rates)
2. Capital and Premium
3. Surrender and Renewal
4. Marriage Valuation
1
COURSE OBJECTIVES
The objectives of this course are to:
 Introduce students to the practical principles of property valuation; and
 Ensure that students are able to practically understand valuation methodologies which
will enable them solve simple mathematical valuation problems using both formulae and
valuation tables
COURSE LEARNING OUTCOMES / COMPETENCIES
Upon successful completion of this course, students will be able to:
 Clarify and explain the usages of various simple valuation
 Differentiate between various mathematical functions of basic valuation formulae
 Solve simple valuation problems using both tables and formulae
 Explain with the use of empirical data, the benefits of investment in real estate based on
projections with the use of the DCF valuation
GRADING SYSTEM FOR THE COURSE
This course will be graded as follows:
Class Attendance
Assignments
Test(s)
Final Examination
TOTAL
5%
15%
20%
60%
100%
GENERAL INSTRUCTIONS
Attendance:attendance is highly recommended as repeat of already treated topics will not be
accommodated in subsequent classes. In case of illness or other unavoidable causes of absence,
the student must communicate as soon as possible with any of the instructors, indicating the
reason for the absence.
Academic Integrity: refer to the university code of conduct handbook and adhere as appropraite
Assignments and Group Work:Students are expected to submit assignments as scheduled to
avoid penalties conditions of extenuating circumstances will be considered. Effort logs will be
used in classes to determine each student’s contribution to group tasks
Code of Conduct in Lecture Rooms: Students should turn off their cell phones during lectures.
Students are prohibited from engaging in other activities (such as texting, watching videos, etc.)
during lectures. Food and drinks are not permitted in the laboratories.
READING LIST
Baum, A. and Crosby, N. Property InvestmentAppraisal 2nd Edition Thomson Business Press
London
Isaac, D. (2002). Property Valuation Principles.Palgrave Macmillan Publishing, Basingstoke,
Hampshire.
Parry’s valuation table (Any edition)
Sayce, S. et al (2006).Real Estate Appraisal: from worth to value. Blackwell Publishing Limited
Oxford, UK.
Scarett, D. (2009). Property Valuation: the 5 methods. 2nd Edition Routledge Abingdon, Oxon.
2
COURSE OUTLINE
Week
1
2
3
4&5
6&7
8
9
10 &
11
12
13
Topic
Introduction and Course Overview
Course outline
Valuation Mathematics
 Names of Functions of mathematical formulae
 Corresponding discounting formulae
 Composition and use of the valuation tables
Examples of simple valuations
 Present value of N1
 Amount of N1 and Amount of N1 PA
 Annuity N1 will purchase
 YP and YP in perpetuity
 Exercises
Examples of simple valuations (continued)
 YP in Perpetuity deferred ‘n’ years
 YP Dual rate adjusted for tax
 Annual Sinking Fund
 Exercises
Term and Reversion
 Capital values of ‘over’ and ‘under’ rented properties
 The 3 approaches to T and R Valuation
 Hard core and Layer approach
 Profit rent valuation
MID SEMESTER TEST
Equivalent Yield
 Calculation of equivalent yield by formula/DCF
 Introduction to the implied growth rate
 Leasehold valuations (Single and dual rates)
 Exercises
Capital and Premium
 Calculation of premium
 Calculation of net income and full rental value
 Introduction to marriage valuation
Surrender and Renewal
 Lessor’s proposed interest
 Lessee’s present interest
 Lessor’s present interest
REVISION
3
Remarks
During this first class, the course delivery
mode will be communicated to the students
and the expectation of the students from the
course will also be documented.
Getting students familiar with the use of
valuation tables and letting them appreciate
how the formulae corresponds with the
tables