couple of cases that point to innovations in public land valuation. Kuwait now requires two separate private appraisals when undertaking public-private partnerships (Peterson and Kaganova 2010: 6). Meanwhile, South Africa mandates that public land be taxed the same way as private land which means that public land undergoes the same valuation processes (Peterson and Kaganova 2010: Box 2). Yet many other developing countries are still struggling to value public land; in these places land auctions are often used as tool to reveal land value through bid pricing. Meanwhile, in Germany, land valuation is dictated by federal regulation.<sup>10</sup> Germany has local land valuation boards that are charged with collecting and maintaining land price data as well as disseminating land price information (Kertscher 2004 and Seidel 2006). The United States and Germany are two examples where land valuation techniques have been refined.

As an example, in the United States the legal system allows each state to define its own method for property valuation. In most cases, states delegate this power to local governments leading to a vast variety of systems used. While the most commonly used is the market value approach, in many cases all three methods are combined to estimate property values; New York City is an example. In New York, these methods are used selectively for different property categories. The sales comparison approach is used to value small residential properties and vacant land, using sales data of comparable properties for the previous three years. The income approach is used to value offices and businesses, taking an estimated income and dividing the net income by a capitalization rate. Finally, the cost approach is used for new construction and renovations, but also for special properties such as stadiums, museums, churches, etc. (Lafuente 2009). The following describe common land valuation techniques given access to relevant data on transactions and land attributes.

# <mark>2.1 SALES COMPARISON APPROACH</mark>

The sales comparison approach relies on market data to analyze information on comparable properties to arrive at an estimated value. This approach is based on the assumption that consumers are willing to pay no more than they would for another property with similar characteristics (Gwartney and Arizona 2001). The reliability of the approach requires considerable amounts of data, particularly transaction information on similar properties to the one being assessed. This method is widely used where large pools of data are available, and is relatively straightforward to analyze, particularly with statistical software. However, there are a number of weaknesses to this approach, including:

- Sales data may not accurately reflect the transaction’s market value, thus

- appraisers must understand the underlying factors of each comparable sale and adjust accordingly, and

- Not all properties have enough market comparables (Arizona 2001: 3.3).

1.1. Valuing undeveloped land reveals another drawback of this method.  In urban areas, where there is a scarcity of undeveloped land, land sales are rare resulting in little data on these transactions. While transaction data on built-up parcels may be available, decoupling land and built-up portions of a site are difficult.  This form of analysis must often be paired with another to arrive at a more accurate valuation (German et al.).   As with any of these land valuation

> 10 For full text of WertV, see: http://www.werttax.de/downloads/wertv.pdf

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