Property valuation: how to determine the market value of a property?

What is my house worth? A crucial question, especially when it comes to selling your property. In the context of real estate transactions, often involving significant financial investments, it is essential to carefully consider property valuation with foresight and accuracy. Sellers and buyers frequently have different perceptions of a property’s true value. This is why it is recommended to carry out a property valuation with the assistance of an expert such as FGP Swiss & Alps.

Definition of market value in real estate

The market value of a property is the price it should achieve within one year under normal market conditions. Several factors influence the value of a house or apartment.

What factors influence property valuation?

The determination of a property’s value depends on a wide range of criteria, including:

• The local real estate market
• The regional job market
• Location and immediate surroundings
• Proximity to public transport
• Presence of educational institutions
• Proximity to shopping centres
• Nearby leisure areas
• Density and type of surrounding buildings
• Potential uses, such as parking spaces
• Year of construction
• Living area and land value
• Layout and room distribution
• Quality of fittings and amenities
• Energy performance of the property
• Current real estate price trends in the region
  

How to accurately estimate a property’s value?

A property valuation provides valuable guidance when setting a selling price. However, estimating the market value of a property is complex, since every property is unique. Each house and plot must be considered individually.
There is no universal “fair price” or standard price lists. The best approach is to determine the market value of a property to arrive at a realistic estimated selling price, which will then serve as a basis for negotiations.

Uses of market value

Market value is used in inheritance cases and by insurance companies. It plays a crucial role in mortgage approvals, as loans are based on the market value assessed by the bank—even if the purchase price is higher. The buyer must then cover the difference between the purchase price and the market value with their own funds, which cannot come from the 2nd pillar (neither early withdrawal nor pledge).

The three main property valuation methods

Depending on the objective and type of property, different valuation techniques may be applied. The three main methods are:

Hedonic or comparable value method

This method is based on actual real estate transaction prices. Using statistics, it breaks a property down into its elements (location, size, number of rooms, etc.) to determine the average price of comparable properties. Banks and online calculators often rely on this method.

Income value method

This approach estimates the sustainable rental income of a property, particularly relevant for investment properties (both residential and commercial).

Intrinsic value method

Calculated based on the new construction cost of the building minus depreciation due to age, plus the land value. This method is used when there is insufficient comparative data for the hedonic approach, for example in remote areas or for luxury properties.

When is an expert appraisal required?

It is advisable to hire a property expert for specific cases such as luxury homes, buildings requiring renovation, properties with large plots, unique or “one-of-a-kind” houses, and historical buildings. The appraisal not only provides a valuation but also delivers a detailed structural analysis of the property.

How to value luxury real estate?

The luxury real estate market is distinct from the traditional property market, mainly due to the unique expectations of wealthy buyers. Valuing a high-end apartment or house relies on specific criteria that go beyond the usual considerations.

Key characteristics of luxury real estate

Amenities and features: Beyond standard criteria such as location, size, and number of rooms, it is the amenities and unique features that define and enhance a luxury property. A spacious balcony, terrace, private garden, swimming pool, high-end kitchen, custom dressing room, hammam, or luxury bathroom can significantly increase value.

Uniqueness and rarity: Buyers of luxury properties seek exclusivity. Rare features in a given area, such as a villa with a pool in a city centre, can considerably raise the property’s value. Conversely, the absence of features typical of high-end properties in the region can lower it.

The importance of professional expertise

While homeowners may attempt to value their own property, luxury property valuation is complex. Sellers may overvalue their property for emotional reasons or undervalue it due to lack of market knowledge. This is why it is recommended to seek the expertise of a specialist in luxury real estate, such as FGP Swiss & Alps, a notary, or a consultant. These professionals factor in the dynamics of the local market and the unique characteristics of the property to set a price attractive to high-net-worth buyers.

Frequently asked questions about property valuation

What influences property value in Switzerland?

• Location: proximity to services, schools, transport, etc.
• Size and layout: living area, number of rooms, and overall design.
• Condition and age: newer or renovated properties tend to be worth more.
• Current market: demand and supply in the region, as well as broader economic trends.
  

How does a property valuation work in Switzerland?

• Professional assessment: an expert evaluates the property based on factors such as location, size, condition, and market comparisons.
• Software tools: computer models may be used to compare the property with similar ones.
  

What is the difference between a valuation and an appraisal?

A valuation gives an approximate value based on a broad analysis, while an appraisal is more detailed and considers technical aspects of the property.

How much does a property valuation cost in Switzerland?

Costs vary depending on the size and complexity of the property. Some services are free, while professional appraisals may cost several hundred to several thousand Swiss francs.

Is a property valuation necessary to sell a home?
While not legally required, a valuation can help set a realistic selling price and attract potential buyers.

Are online valuations reliable?

Online valuations can provide a first indication but cannot replace a professional appraisal, as they do not account for the specific characteristics and condition of the property.

How long does a property valuation take?

It can range from a few days to several weeks, depending on the complexity of the property and the expert’s availability.

Can a property valuation affect property tax in Switzerland?

Yes, the estimated value can impact the fiscal value of the property, which is used to calculate certain taxes. However, tax valuation methods may differ.

Do I need to prepare documents for the valuation?

Yes, it is helpful to provide documents such as floor plans, renovation records, inspection reports, etc.

Can a property valuation be used in negotiations?

Absolutely. A professional valuation is a powerful tool during sale or purchase negotiations.

Good to know: It is always advisable to consult local professionals for specific, tailored advice in Switzerland.
Would you like to carry out a property valuation? FGP Swiss & Alps can support you in your real estate project.