## Methods to calculate Property Depreciation | Building Costing and Estimation

Depreciation is the gradual exhaustion of the usefulness of a property. This may be defined as the decrease or loss in the value of a property due to structural deterioration, life wear and tear, decay and obsolescence.

#### Four Methods for calculating depreciation

1. Straight line Method
2. Constant percentage method
3. Sinking Fund Method
4. Quantity Survey Method

#### Straight Line Method

In this method, it is assumed that the property losses its value by the same amount every year. A fixed amount of the original cost is deducted every year, so that at the end of the utility period, only the scrap value is left.

#### Annual Depreciation, D = (original cost of the asset – Scrap Value)/life in years

For example, a vehicle that depreciates over 5 years, is purchased at a cost of US\$17,000, and will have a salvage value of US\$2000, will depreciate at US\$3,000 per year: (\$17,000 ? \$2,000)/ 5 years = \$3,000 annual straight-line depreciation expense. In other words, it is the depreciable cost of the asset divided by the number of years of its useful life.