Calculating the market value of a property: how it works
How is a property’s market value calculated? And what does this value signify? Comparis sheds light on the matter.
07.03.2023
iStock/Michael Derrer Fuchs
1. What is the market value of a property?
The market value is the price a property can achieve when it is put on the market. It is the result of a property valuation.
The price is based chiefly on the land value and the building value combined. The most important component is the land price. In low-tax regions and areas with a high demand for property, the land price is usually higher than in less attractive regions.
2. Why is it necessary to estimate the market value?
The market value forms the basis for determining the selling price of a property. Do you wish to sell your property? If so, establishing the market value will help you avoid pricing your home too high or too low when you put it on the market. The market value is also decisive in calculating the loan-to-value ratio when taking out a mortgage.
How much does a market value estimate cost?
The cost of determining the market value varies depending on the valuation method, provider, size of the property and complexity. For example: with the hedonic valuation method, you should expect to pay between 300–2,000 francs.
Property appraisal as a starting point
Would you like to get an initial idea of the possible market value of your property free of charge? The Comparis property calculator will give you a good starting point.
3. What valuation methods are used?
There are three main methods of valuation for real estate:
Intrinsic value method: This focuses on the land value and the current value of the building. The intrinsic value method is usually used for luxury or aficionado properties.
Hedonic pricing method: This model is mainly suitable for standard types of owner-occupied property. Hedonic pricing determines the value of the property on the basis of prices actually paid for similar properties in the area. Banks and estate agents usually use hedonic pricing models as they produce valuations that reflect market conditions.
Capitalized income method: This is used to value investment property. It derives the value of a property from the sum of constant and perpetual net rental income.
4. How do you calculate the market value of a property?
Calculate market value using online tools
Property owners can calculate the value of their property free of charge with online tools such as the Comparis property valuation tool. The calculation is based on factors such as location, living space, year of construction and the condition of the property.
This type of valuation tool provides a rough estimate and is the basis for a more in-depth appraisal by an expert.
Establishing the market value using expert estimates
Homeowners often over-estimate the value of their property. Professional appraisers have the necessary expertise to value factors such as the location, condition and any special features of the property appropriately.
Establishing the market value using estate agent estimates
Professional estate agents are familiar with the market and can use hedonic pricing methods to produce a valuation that reflects market conditions.
5. Is the market value the same as the selling price?
The selling price actually achieved for a house or apartment does not have to match the market value. This price is heavily influenced by supply and demand.
If the supply of properties exceeds demand, you can expect the selling price to be lower than the market value. However, if demand for properties exceeds supply, you may achieve a selling price above the market value.
6. What factors affect the market value?
The value of a property is influenced by various factors. Besides the land price, they include:
Location and surrounding area of the property
View
Sunlight
Noise
Access
Age and general condition of the property
Standard of renovation and energy efficiency
Heating
Building structure
Need for renovation
Property size and fixtures, fittings and amenities
Floor plan
Surrounding area
Features such as garage, balcony and lift
The commune and region in which the property is located
Current level of demand in the area
This article was first published on 17.03.2020
