What is the market value? - The definition
In Switzerland, the market value is often referred to as “tax value” or “official value.” It is set by the cantonal tax authorities and serves as a basis for taxing real estate. The market value is generally lower than the actual market value. It is not adjusted annually, but is reassessed at longer intervals and, apart from taxation, has no important significance. Evaluation methods may vary from canton to canton.
The market value, on the other hand, corresponds to the price that can be achieved on the free market for a property. This is almost always above the market value of the property.
Evaluation procedure for determining market value
There are various valuation methods available to determine the market value of a property in Switzerland. Each process is suitable for different types and purposes of real estate.
1. Real value or asset value method
Die Real value method (also Tangible value method called) is mainly used for owner-occupied real estate or special real estate without an income target. The process is based on the replacement costs, i.e. the costs that would be incurred if a new building was built on the same plot of land, taking into account the decrease in value due to the age of the building.
- Formula for calculating the real value:
- Bauwert = construction costs + additional costs — depreciation due to age
- Real value/net asset value = land value + construction value
This method is useful when it comes to properties that are difficult to compare or are specially designed, such as historic buildings or residential buildings in rural areas.
2. Income value method
that Income value method is suitable for properties that regular income generate, such as rental properties or commercial real estate. Here, the annual net rental income is discounted to the current value. This is useful for calculating the market value of real estate whose value is directly related to its income.
- Formula for calculating income value:
- Income value = Net rental income per year × 100/capitalization rate
The capitalization rate reflects risk and market conditions and may vary depending on location and property type.
3. Hedonic evaluation method (comparative value method)
Die hedonic evaluation method or that Comparative value method It is mainly used by banks. The valuation is based on the market value of comparable properties that have recently been sold. Based on factors such as location, condition, size and equipment of the property, a comparison with similar properties is made.
- Formula for calculation using the comparative method:
- Market value = comparative price per m² × area of the object to be valued
This method requires a sufficient number of reference objects. If no suitable comparative data is available, other methods can be used.
Market value calculation practice and tips
Determining the market value requires precise consideration of various factors:
- Condition and age of the property
- location, including environment and connectivity
- Size and layout of the object
- energy efficiency and sustainability standards
The market value in the canton of Zurich
The Canton of Zurich uses various methods, depending on the type of property:
Undeveloped land: Determination based on comparative prices from the last three years for similar properties.
Residential and commercial properties as well as condominiums:
Use of specific formulas depending on the type of property:
→ Single-family houses: land value + construction value
→ Condominium: land and building value share
→ Multi-family buildings and leased commercial properties: Combination of land, construction and income value Industrial and commercial properties:
→ Usually the sum of land and construction value.
The hedonic method can be used in certain cases when other methods are not enough.
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