Hedonic pricing: what is the hedonic pricing of property?

2. How is a property valued with the hedonic pricing method?

The hedonic approach considers the characteristics of a property in its valuation and assigns them a particular value. These characteristics might be the floor space, the number of rooms or the year of construction.

Using data from properties that have been recently sold, the hedonic method determines the influence of these characteristics on the price. To achieve a reliable and precise valuation, you need a comprehensive data set of the market.

3. When is hedonic pricing appropriate?

standard types of property. However, when it comes to more unique types of properties, this method has its limitations. In these cases, the prices risk being distorted due to the low number of comparable properties.

Hedonic pricing offers several advantages compared to other property valuation methods:

• Fast: once you have collected the necessary data on the characteristics, the valuation itself is very quick.

• Market-oriented: since the valuation is based on data relating to many sold properties, the method is highly objective and provides a good reflection of the market.

• Applicability throughout Switzerland: this method can also be used for properties in remote locations, making it suitable for use in all regions of Switzerland.

4. Who can perform a hedonic valuation?

Many banks, pension funds and insurance companies use hedonic valuation to determine a property’s market value. Estate agents also use it in their valuations. If you are not appointing an estate agent to sell your property, but would still like to get a valuation using hedonic pricing, there are a few ways to do this:

1. You can use a free online tool like the Comparis property valuation tool to get an initial estimate of your home’s value.

2. You can use a paid online tool such as IAZI (only in French and German) to value your property. Depending on the tool, this may cost between 300–700 francs.

3. You can appoint a property valuer. You can expect to pay between 1,000–2,000 francs for this service.

5. What other valuation methods are there?

In addition to the hedonic pricing method, experienced estate agents may use other methods to calculate a property’s value:

• Capitalized income method: the capitalized income method uses net rental income to determine the market value of a property. It is primarily used for investment properties.

• Intrinsic value method: the intrinsic value method is recommended when valuing luxury property. This approach bases the overall value of the property on the value of the land and the current value of the building on that land. The intrinsic value may therefore differ from the market value.