THE FEDERAL POLYTECHNIC, ILARO,

OGUN STATE.

SCHOOL OF ENVIRONMENTAL STUDIES

DEPARTMENT OF ESTATE MANAGEMENT AND VALUATION

COURSE:
EST 324
LAND ECONOMICS II

TOPIC:
CONCEPT OF VALUE

BY
IBRAHEEM ADEIZA H/EMV/22/0344

OLADEJO KABIRAT H/EMV/22/0340

OLANIYAN ABEEBAT H/EMV/22/0349

OLAOPA HABEEBAT H/EMV/22/0361

BABATUNDE EMMANUEL H/EMV/22/0346

SUBMITTED TO:
ESV. OLUWOLE

SEPTEMBER, 2023.
CONTENT

Concept of value

Factors that determine the value of a property

Methods to determine the value of a property

Nature of relation to land

Social value

Value of land in relation to their uses

Cost benefit analysis

Conclusion
 CONCEPT OF VALUE

The concept of value refers to the worth, utility, or importance that something holds

for an individual or a society. It is a subjective perception, varying from person to person,

and can be influenced by various factors such as personal beliefs, needs, preferences, and

cultural, social, or economic contexts.

In economics, value is often associated with the ability of a good or service to satisfy

human wants or needs. The value of a product is generally determined by the demand for it

in the market, which in turn depends on factors like scarcity, utility, and price. The field of

study that focuses on understanding and measuring economic value is known as value

theory.

In relation to Real estate, value is the monetary worth of a property or the highest sum

that a prospective purchaser would be expected to pay for it in the open market, given

sufficient time for marketing and considering all potential uses to which it could be put. Here

are some few characteristics of a value:

- Value is subjective and can vary from person to person.

- Value can change over time, due to factors like inflation, changes in supply and demand, or

technological advancements.

- Value can also be influenced by external factors, such as government regulations,

environmental concerns, or social movements.

- Value is often linked to scarcity - the rarer something is, the more valuable it can be

perceived to be.

Value can also extend beyond monetary aspects and be seen in different dimensions.

For instance, social values refer to the principles and ideals that a society holds as important,

such as justice, freedom, or equality. Personal values are deeply held beliefs or principles

that individuals use to guide their behavior and decision-making.

Factors that determine the value of a property

The value of a property is influenced by several factors, which can vary depending on

the specific real estate market and location. Here are some key factors that commonly affect

property value:

1. Location: The location of a property is a fundamental factor that significantly influences

its value. Desirable locations, such as proximity to amenities, good schools, transportation,

and low crime rates, tend to increase property values.

2. Size and layout: The size and layout of a property can impact its value. Generally, larger

properties with more usable space, such as bedrooms, bathrooms, and living areas, tend to

have higher values. Additionally, efficient and functional layouts may add value.

3. Condition and age: The condition and age of a property can affect its value. Well-

maintained and updated properties tend to command higher prices. Older properties may

have historical value but might require additional maintenance or renovations.

4. Market conditions: Property values are influenced by supply and demand dynamics within

the real estate market. Factors like interest rates, economic conditions, and changes in

population or employment can impact market conditions and subsequently property values.

5. Comparable sales: The sale prices of similar properties in the same neighborhood or area,

known as comparable sales or "comps," are used to determine the value of a property. Real

estate appraisers and agents use these comparable to assess the value of a property in relation

to recent sales.

6. Amenities and features: The presence of desirable amenities and features, such as a

swimming pool, landscaped garden, parking space, or high-end appliances, can increase the

value of a property.

7. Market demand: The level of demand for properties in a particular area or market can

influence their value. If there is high demand and limited supply, property values tend to

increase. Conversely, an oversupply of properties or a lack of demand can lead to lower

values.

8. Zoning and regulations: Local zoning regulations and restrictions can affect property

values. For example, zoning laws that permit certain uses or prohibit others can impact

property values by influencing the potential for development or the quality of the

neighborhood.
 Methods to determine the value of a property

Several methods are used to determine the value of a property, and the choice of

method depends on the purpose of the valuation and the availability of data. Here are some

common methods:

1. Market comparison (comparable sales approach): This method involves comparing the

property being valued to similar properties that have recently sold in the same area

(comparable sales or "comps"). Adjustments are made for differences in size, condition,

location, and other relevant factors to determine an estimated value.

2. Income approach: This method is commonly used for valuing income-generating

properties, such as rental properties or commercial buildings. It involves estimating the value

based on the property's income potential, considering factors like rental income, operating

expenses, vacancy rates, and capitalization rates.

3. Cost approach: This method considers the cost of replacing or reproducing the property. It

involves estimating the value by calculating the cost of the land and the cost to rebuild the

property in its current condition, accounting for depreciation and obsolescence.

4. Residual land value method: This method is frequently used for valuing development or

investment properties. It involves estimating the value based on the future income potential

or development potential of the property, after deducting estimated project costs,

development expenses, and an acceptable profit margin.

5. Appraisal by licensed professionals: Professional appraisers, who are licensed or certified,

can use a combination of the above methods, along with their expertise and knowledge of the

local market, to determine the value of a property. They typically provide a detailed appraisal

report that includes data analysis, market trends, and their professional opinion of value.

NATURE OF RELATION TO LAND

The nature of the relationship to land refers to the various ways in which individuals

and societies interact with and perceive land. It encompasses the multi-faceted aspects of

human connections to land, including social, cultural, economic, and environmental

dimensions.

Socially, land often plays a vital role in shaping communities and providing a sense of

identity and belonging. Land and territory have historically been linked to cultural heritage,

ancestral ties, and indigenous rights. The social relation to land reflects how people use it for

social activities, such as farming, housing, recreation, and gathering spaces.

From an economic perspective, land is a valuable resource that can be owned, used,

and traded. It serves as a basis for agriculture, industry, construction, and infrastructure

development. The economic relation to land involves land value, property ownership, land

use planning, and the economic activities associated with land, such as real estate markets

and land management.

 Culturally, land holds symbolic meanings and spiritual significance in many societies.

It may be regarded as sacred or ritually important, and cultural practices and ceremonies

often revolve around the land. The cultural relation to land involves the preservation of

cultural landscapes, heritage sites, and traditional land uses.

Environmentally, land is part of the Earth's natural ecosystems and plays a vital role

in sustaining biodiversity, regulating climate, and providing ecological services. The

ecological relation to land focuses on sustainable land management, conservation strategies,

and the impact of human activities on the natural environment.

It is important to recognize that the nature of the relationship to land can vary across

different cultures, regions, and historical contexts. Different societies and individuals may

have distinct views, values, and practices regarding land ownership, land rights, land use,

and the responsibilities of stewardship.

VALUE OF LAND IN RELATION TO THEIR USES

The value of various lands can vary based on their specific uses and the demand and

utility associated with those uses. Here are some examples:

1. Agricultural land: Agricultural land is used for farming, crop cultivation, or livestock

rearing. Its value is driven by its fertility, productivity, access to water, proximity to markets,

and prevailing commodity prices. The value of agricultural land is usually assessed based on

its potential for generating agricultural income.

2. Residential land: Residential land is designated for housing purposes. Its value is

influenced by factors such as location (proximity to amenities, schools, transportation), size,

zoning regulations, and the demand for housing in the area. Residential land is typically

valued based on its suitability for residential development and its market potential.

3. Commercial land: Commercial land is used for commercial activities such as offices, retail

stores, hotels, or restaurants. The value of commercial land depends on factors like location,

accessibility, visibility, proximity to major roads or transportation hubs, and the potential for

generating commercial income. The value is typically based on the potential rental income or

market value for commercial use.

4. Industrial land: Industrial land is designated for industrial activities, including

manufacturing, warehousing, or logistics. The value of industrial land is influenced by

factors such as proximity to transportation networks, availability of utilities, zoning

regulations, and the potential for generating industrial income. It is typically valued based on

its suitability for industrial use and its market potential.

5. Recreational and tourism land: Recreational and tourism land, including coastal areas,

national parks, or tourist destinations, holds value for recreational activities, nature

conservation, or tourism development. The value is driven by the attractiveness of the natural

surroundings, environmental features, biodiversity, scenic beauty, and the potential for

tourism-related income.

6. Conservation land: Conservation land includes protected areas, nature reserves, or

ecologically sensitive land. Its value is associated with biodiversity protection, ecological
services, and the preservation of natural resources. The value often derives from the intrinsic

worth of these lands and their contribution to long-term sustainability and environmental

well-being.

It is important to note that land values can fluctuate over time based on market

conditions, changes in land use regulations, economic factors, and societal trends.

Additionally, the specific characteristics and location of the land play a significant role in

determining its value for different uses.

Social value

Social value refers to the principles, ideals, and beliefs that a society or community

considers important and desirable. It represents the collective perspective on what is deemed

valuable for the well-being and betterment of society as a whole.

Social values shape the norms, behaviors, and decisions of individuals and groups

within a society. They provide a framework for moral reasoning, ethical standards, and guide

the choices made by individuals and institutions. Social values often reflect what a society

collectively deems as desirable, just, fair, or beneficial. Examples of social values can

include ideals such as justice, equality, freedom, fairness, integrity, compassion, respect for

diversity, sustainability, and community welfare. These values help shape social norms,

influence social interactions, and guide policies and actions taken by governments,

organizations, or institutions.
 Social values can vary across different cultures, regions, and societies, as they are

influenced by factors such as history, traditions, religion, education, and prevailing social,

economic, and political contexts. They play a significant role in shaping social cohesion,

social progress, and the overall well-being of a society.

PIGOU, a renowned economist says "Private Costs and Benefits" are costs incurred

and benefits received by the person carrying out an enterprise while "social costs and

benefits" are all costs and benefits which result from the enterprise experienced by the

community including the person carrying out the enterprise. In other words, "Social Costs

and Benefits" include "Private Costs and Benefits". LICHFIELD uses two different

definitions. In one, he uses "Private Costs" as being those costs which can be measured in

money terms to be called 'tangible or economic' and "Social Costs" as those costs which

cannot be measured in money terms to be called 'intangible or social’.

COST BENEFIT ANALYSIS

Cost-benefit analysis (CBA) is a systematic and quantitative approach used to assess

the potential benefits and costs associated with a project, policy, or decision. It is a tool

commonly employed in economics and public policy to evaluate whether the benefits of an

action outweigh the costs, helping to inform decision-making and resource allocation. The

process of identifying the benefits and costs of a project (private or public) is influenced by

the organization funding the project and the goals they have established for it. For example, a

private company may prioritize financial benefits, while a government agency may prioritize
social or environmental benefits. For a private company, the main goal is usually to make as

much money as possible. However, they may also have other goals, like growing their size

and influence in the market, or increasing sales volume. Thus, in identifying benefits for a

private commercial enterprise, it is the contribution of the project to the profit of the

enterprise that is usually considered. This can be quantified in terms of a manufacturing

enterprise as the increase in the level of production brought about by the project. Costs to the

private commercial concern refer to resources used up in the incremental output brought

about by the project.

For the private commercial enterprise, the concern may not extend to the indirect

effects of the project on society as a whole. For example, the enterprise in producing

additional output might eject or emit effluents into a nearby river, killing the fish and causing

health hazards to the communities living down the stream. This may not be of interest to the

private commercial enterprise but to society as a whole, this is of much interest in terms of

cost. As highlighted above, private commercial enterprises are concerned with direct benefits

and costs, while the public sector project analyst goes deeper and examines other indirect

costs and indirect benefits and takes them into consideration in the appraisal of the projects.

For public projects, cost-benefit analysis takes into account the project's impact on

society as a whole, including factors like:

- Impact on the environment

- Impact on social equity and justice

- Economic benefits, such as job creation or increased tax revenue

- Impact on public health and safety

- Impact on cultural heritage or historical significance

The goal is to balance the monetary costs of the project with the broader social and

environmental benefits it can bring.

CONCLUSION

The concept of value is multifaceted and can be applied to various aspects of life,

ranging from economy, philosophy, Realty, psychology and also art. It is very important that

different methods may yield different values and Valuation usually involves considering

multiple approach. Understanding the diverse nature of the relationship to land is crucial for

managing resources sustainably, respecting indigenous rights, promoting social justice and

addressing environmental challenges. Additionally, the specific characteristics and location

of land play a significant role in determining its value for different uses. While recognizing

the social values important for promoting social harmony, addressing social issues and

developing policies that goes with the collective need for the community. Lastly, cost benefit

analysis helps decision-makers understand the potential consequences and trade off of

different options and provide a structured framework for making informed choices.