Example: Valuing a residential villa by the cost method

Valuing real estate using the cost method


  • Location of the property: The property is located in Jeddah. It is an economically and commercially active city.
  • Property areas: The land area is 625 square meters. The total building area is 500 square meters. The wall is 100 meters long. Basement area of 200 square meters.
  • Property condition: 15 years old. It’s a middle age.
  • Features of the villa: Swimming pool (4m*6m*2m). Car umbrellas 30 square meters

Cost estimate

The indicative price guide available on the website of the General Authority for Certified Valuers is used, where the guide contains the prices of the cost of building real estate of all kinds and is summarized in the price per square meter for the flat, as it includes all costs and expenses, as well as the developer’s profit.

  • Indicative villa prices:
Replacement Cost (Indicative Price Guide) for Buildings
General classification Residential
Detailed classification Residential villa
Category/Improvements class A
Cost of construction and improvements (buildings) 2,400 SAR per m2
Fence construction cost 600 SAR – M.I.
Basement Construction Cost (Buildings) 3,000 SAR per m2
Percentage of bone cost to total construction cost 0.0%
Bone construction cost (buildings) 0 SAR per m2
Basement Bone Construction Cost (Buildings) 0 SAR per m2
Pools 1,200 riyals per m3
Parking lot awnings 120 SAR per m2
Fire Alarm and Fire Fighting System 0 SAR per m2
Central air conditioning 0 SAR per m2
  • Calculate the cost:


Calculating total construction costs
Total area of buildings 500.00 m2
Total cost of construction of buildings and improvements SAR 1,200,000
Total Mabey Area (Bone) 0.00 m2
Total cost of construction of buildings and improvements 0 Real
Total Wall Length 100 m.i.
Total Fence Cost 60,000 SAR
Total basement area 200.00 m2
Total basement construction cost 600,000 SAR
Total Basement Area (Bone) 0.00 m2
Total basement construction cost 0 Real
Pool size 48 m3
Total pool construction cost 57,600 SAR
Area of parking lot awnings 30.00 m2
Total cost of constructing parking lot canopies 3,600 SAR
Total building area Alarm and firefighting system 0.00 m2
Total cost of fire alarm and firefighting system 0 Real
Total building area Central air conditioning 0.00 m2
Total cost of central air conditioning 0 Real
Total construction costs (excluding financing costs) 1,921,200 SAR
Duration of development 1.0 years
Finance interest rate per annum 7.0%
Funding percentage of development time 50.0%
Financing ratio of financing cost 50.0%
Total Cost of Funds 33,621 SAR
Total Development Value 1,954,821 riyals
  • Calculate the value of the building and deduct depreciation:
Calculating the value of buildings
Lifespan of the building 40 years
Remaining life of the building 15 years
Annual depreciation rate (extended life) 62.5%
Depreciation rate 0.0%
Economic depreciation rate 0.0%
Total development value 1,954,821 riyals
Depreciation value 1,221,763 riyals
  • The value of the building is 733058 SAR after deducting depreciation
  • The land was valued by the comparative method at SAR 2 million
  • Add the value of the building with the land to make the market value of the villa 2,733,058 SAR


Based on the data and steps above. The market value of the property shown above is SAR 2.73 million.


  • The actual market value of the property may differ from the estimated market value. This is due to other factors not considered in this assessment. Such as the quality of the finishes and services provided in the property.
  • The comparative method can be used to assess the value of land only. using sales data for similar properties in the area.


In addition to the above-mentioned data. The following data can be added to the property appraisal:

  • Type of construction: Is it concrete or bone construction?
  • Quality of finishes: Are the finishes good, average or poor?
  • Services provided: Does the property have services such as security, janitorial, and cleaning?

This data can affect the market value of the property. So it’s important to take them into account when making an assessment.

Villa valuation

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