ABOUT THE LIMITATION OF USE OF THE COST APPROACH FOR PRICE FORMING IN HOUSING MARKET

Abstract

A number of technical and economic features affecting pricing in building
production, determine the methods specifics for determining prices of construction products. In
today's conditions of building market relations the most widespread is a cost approach to the
prices formation in the residential real estate market, which, together with the significant
advantages, has a number of shortcomings, which indicate the limited use of it, namely: the
unreliability of reflecting the projected income value; the problem of calculating the cost of old
buildings reproduction; the complexity of determining the value of accumulated old buildings
depreciation; a separate assessment of the land plot from the buildings; the discrepancy between
the cost of the acquisition of the estimated property object costs for the new construction of
exactly the same object.
The article deals with the processes of price policy formation at the building industry
enterprises with the purpose of improving their competitiveness. The peculiarities of costly
methods use of real estate valuation, their advantages and disadvantages are revealed. The main
factors influencing formation of the pricing policy of building industry enterprises are analyzed.
It is proved that a cost approach is appropriate to apply for new construction analysis, for
the identification of various options for land use, for assessment for tax purposes, insurance,
consequences of natural disasters and, if necessary, assessment of special buildings and
structures.