What does the term 'cost index' refer to in property valuation?

The term 'cost index' in property valuation primarily refers to an indicator of cost trends over time. It serves as a tool for appraisers to assess how construction and property-related costs change over various periods. By tracking these trends, appraisers can make more informed decisions regarding property value adjustments based on recent or historical cost data. This is particularly useful when estimating the replacement or reproduction costs of properties.

In contrast, the other options do not accurately capture the essence of what a cost index represents in the context of property valuation. The first option suggests that it reflects average property values, which does not encompass the cost-focused nature of the index. The third mentions a ratio comparing rent to sales price, which is more related to income approaches in valuation rather than cost trends. Lastly, the fourth describes a valuation method for commercial properties, which diverges from the specific function of a cost index in monitoring construction and property costs over time.