What Is an Adjustment Index?

The index adjustment method, also known as the price index adjustment method and the price index method, is based on the price index of similar assets (preferably the same asset) in the past years, and uses statistical forecasting techniques to find out the price change direction, trend and speed of the evaluation target. The price index of the original purchase date and the valuation base date is calculated, and the replacement cost is calculated based on the price index change ratio and the original value of the assets in these two periods.

Index adjustment

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Index adjustment method

Index adjustment method

The index adjustment method is a method of estimating the current construction cost of a house by multiplying the original book value by the construction price adjustment coefficient. It is generally applicable to the evaluation of group buildings and can also be used for the evaluation of individual buildings, but the reliability of the evaluation is poor. There are two key factors in the calculation of house valuation using this method, namely the original book value and the adjustment coefficient used. Only when the original book value is correct and the adjustment coefficient used is accurate can the calculation result be accurate and reliable. In the evaluation of housing construction of a group, due to the lack of reliability of the book value of many projects, some adjustment coefficients are not accurate, and this method should be avoided.

When the index adjustment method is required to make a house valuation as a last resort, the original book value and the correctness of the construction price adjustment index should be carefully examined. Only when the two factors have a relevant relationship that meets the evaluation requirements, can this method be used to calculate the construction cost of the house.

Index Adjustment Method

The construction price adjustment coefficient is composed of the cost adjustment coefficient, the previous period and other cost adjustment coefficients, and the comprehensive adjustment coefficient of capital costs. The former refers to the proportional relationship between the construction costs consumed during the construction of the house during different construction periods; the latter is Refers to the proportional relationship between the expenses and costs in addition to the construction cost during the construction of the house during the different construction periods and the ratio of the comprehensive ratio of capital costs during different construction periods. There are other aspects of adjusting the proportional relationship that have not yet been considered. In the calculation of the replacement value, the adjustment coefficient of the replacement value shall be expressed by the comprehensive adjustment coefficient of the building. The comprehensive adjustment coefficient of the building may be approximately calculated according to the following formula.

C: building comprehensive price adjustment coefficient;

C 1: the cost adjustment factor at the time of the evaluation base date;

C q1: the up-front and other cost factors at the time of the assessment base date;

C z1: comprehensive rate of capital cost at the time of the assessment base date;

C q2: original upfront and other cost factors;

C z2: comprehensive rate of original capital cost;

J c: building replacement value or building unilateral replacement value;

J z: building book cost value or building book unilateral cost value.

Example of Index Adjustment Method

In the evaluation of building construction, it is unscientific to use only one cost adjustment coefficient for cost calculation. For example, an office building in Beijing, brick-concrete structure, 6 floors, 3.0m height, brick strip foundation 365mm thick brick exterior wall, 240 thick brick interior wall, steel windows, clad wood doors, door covers, terrazzo floor, The external wall is water-washed with stone and the internal wall is sprayed with large white slurry. Each floor is equipped with ordinary bathrooms. The plumbing and heating facilities are complete. The construction area is 3058 square meters. , The unilateral replacement value at the base date of the evaluation is sought. The cost adjustment factor for the benchmark date and house construction is determined to be 531%. The initial and other expense ratios during the construction period are 5.65%. The capital cost rate for the planned economy period should be 0. At 7.86%, the cost of capital is half of 5.49% for one year, or 2.745%. then

The unilateral cost price at that time = 570409/3058 = 186.53 yuan / m2,

Building comprehensive price adjustment coefficient = 531% × (1 + 7.68%) × (1 + 2.745%) / (1 + 5.64%) × (1 + 0%)

= 531% × 107.68% × 102.745% / 105.64% × 100.00

= 556.11%

Unilateral replacement value at the valuation base date = 186.53 × 556.11%

= 998.25 yuan / m2

Replacement value = 1037.31 × 3058

= 3172093.98 yuan

Notes on Index Adjustment

When using the cost index to evaluate the cost of a house, the type of the cost index should be paid attention to. The cost index of the corresponding category should be selected to adjust. Generally, the cost index can be divided into reinforced concrete frames, reinforced concrete shelves, bricks and concrete according to the type of structure , Bricks and other structures, and other structural cost adjustment coefficients, structures can be applied according to their corresponding structure type adjustment coefficients or other structural adjustment coefficients. It should also be pointed out that the price index and the chain index published by the relevant state departments, and the fixed asset adjustment index used for clearing the capital shall not be used. Because these indexes are too broad in scope, their concepts are vague, and they are not targeted. There are also cost factors that are divided by building use, such as those for warehouses, hospitals, office buildings, houses, boiler rooms, and workshops. Because the building cost is related to the structure, but not to the use. In addition, the meaning of the construction cost and the replacement value of the building should be distinguished. The construction cost has increased, and the replacement value may not necessarily increase, because when the current period and other cost rates or capital cost rates are greatly reduced, the construction replacement value may Still lower.