Which method is commonly used for estimating depreciation?

The economic age-life method is a widely recognized approach for estimating depreciation in the context of property valuation. This method operates on the principle that the value of a property decreases over time due to physical wear and tear, obsolescence, and other factors impacting its useful life. By assessing the total expected lifespan of an asset and estimating its remaining life, the economic age-life method provides a systematic way to calculate depreciation as a proportion of the total value.

In this method, the overall value of the property is determined, and then a deduction is made based on how much of that value has been consumed by the passage of time. This allows appraisers to create a more accurate and justified valuation that reflects the current condition of the property in relation to its age. It is particularly useful in settings where the property consists of unique or specialized elements that may not have easily comparable market data available.

In contrast, other methods mentioned, like the replacement cost and cost approach, focus on calculating value based on the cost to replace or reproduce the asset rather than assessing the impact of depreciation over time. The market comparison method relies on comparable sales data to establish value rather than explicitly calculating depreciation. Therefore, the economic age-life method distinctly emphasizes the aging process and the consequent decline in value