6
II. LITERATURE REVIEW
2.1. Land Value
As articulated by Longley et al. [2001], there are three basic methods to assign a value of land. These methods also can be used to assign a value of
properties: a. Cost method
Cost method is based on replacement cost of the property and the value of the land. Assessor must examine data on construction costs and vacant land
values. b. Income method
The income method takes into consideration how much income a property would generate if it were rented. This requires details on current market rents,
vacancy rates, operating expenses, taxes, insurances, maintenances and other costs.
c. Market method The market method is the most popular, also in Indonesia. It compares the
property to other recent sales that have a similar location, size, condition and quality.
Assessors are responsible for accurately, uniformly and fairly judging the value in jurisdiction. The expert opinion in this research is very necessary. The
expert opinion is very subjective in the field, even though very subjective, but the expertise should be involved. In the scope of scientific, the expert opinion is valid.
The expert opinion is very independent, means the expert could determine either
7 the buffering road distance or the land zone valuation process according to the
expertise experience, expertise knowledge and the expertise skill [Longley et al, 2001].
Value objects are mostly classified in accordance with the use for which it is established. The four main categories are residential objects, agricultural
objects, commercial and industrial objects. When considering whether a certain type of property should be part of the
mass-valuation process, the cost for the appraisal should also be taken into account. The resources put to creating and maintaining separate models for
properties that will not be taxed - or to do individual valuations - will to a large degree be wasted if it does not result in any revenue. Types of properties that
should not be appraised are for instance: a. public land state land such as parks, streets, roads, water areas;
b. cultural and natural reserves; c. forest land.
Valuation models should describe how the property market thinks and acts , where there are many transactions on the open market, the better chance to
capture the market s sentiments. If not, do simulation market situations, i.e. what would a buyer of a certain type of property look for and what would be willing to
pay considering what other alternatives. Different value objects have different valuation models, depending on the
description separate market sectors. Different categories of buyers are looking for residential objects, business objects and industrial objects. Totally different
8 criteria for selecting an object, and criteria is what should be captured in the
valuation model for each type of property. Different criteria for selecting property result in that land for industry is
more attractive in some areas, while land for residential purpose in other areas. The influence of location is captured in value maps, with zones showing different
market value levels. Each type of value object has a value map, and each zone on the value map is connected to a table, describing how the value for a specific
value object or unit should be assessed. The value map, together with tables for all market levels, represents the valuation model for each type of value objects
[INLA Project, 2003].
2.2. Principles of Land Valuation
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