ABSTRACT
This chapter reviews the traditional methods used by valuers to assess market value and related market-based transactions using the income capitalisation approach. Freehold property can be owner-occupied or let. The letting may be periodic, e.g. from month to month or from year to year, or on a lease for a term of years. Normally the freeholder will seek to obtain the market rent for the property, namely: The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing where the parties had acted knowledgeably, prudently and without compulsion. A freeholder will be receiving less than market rent if the rent was fixed some years ago and rental values have risen, or if the lessee paid a premium to the freeholder when they took the lease.
