How much is your property worth?
Comparative value, asset value, income value: three methods used to determine the value of a property — and why, ultimately, it is the interplay of all these criteria that counts.
The value of a property is not determined by the owner’s wishes or the price of a neighbouring property, but by the market — and this can be assessed using three recognised methods. Which one is appropriate depends on the type of property. A good valuer is familiar with all three and knows when to use each one.
The comparative value approach
In a comparative valuation method, the value of the property is determined by comparing the purchase prices of similar properties. An average price is calculated from a sample of comparable properties. The general rule is that the more comparable prices are included in this calculation, the more accurate the valuation will be. The age of the property, its energy consumption and its fittings are factored into the result through adjustments. This method is used, for example, for second-hand flats, building plots or terraced houses — wherever there are sufficient comparable properties.
The asset-based valuation method
This method involves determining the land value, the building value and the values of other components of the property. Where applicable, this may also include the property’s fixtures and fittings. Here too, age-related wear and tear, the location and construction costs are factored into the calculation: How much would it cost to build the property from scratch today, and how much of that value has already been eroded by age and condition? The asset value method is used, for example, for new-build projects or detached and semi-detached houses, for which there are few comparable prices.
The income approach
In the income approach, the value of the property is determined by capitalising the net income generated by the property. This method is primarily used for rental properties such as blocks of flats, commercial buildings and office properties, but also for apartment blocks. Investors are interested not only in the location and facilities, but above all in how much they can earn from this property — and how secure that return is.
What else matters
In addition to these three methods, there are other criteria that must be taken into account when valuing a property. To determine the actual value as accurately as possible, both the property’s characteristics — location, year of construction, usable and living space, fittings, condition and energy performance certificate — and legal factors such as special rights of use and the amount in the repair reserve must be taken into account. These criteria are weighted differently in relation to one another. For example, a house with a larger living area may be cheaper than a small house — simply because of its location.
Why teamwork is key
Essentially, the interplay of all these criteria is crucial for determining the value. A professional and experienced property valuer takes them all into account in order to determine the value as accurately as possible. After all, a correctly determined property value not only speeds up the sale but also secures the best possible price for the seller: if a property is priced too high, it will remain on the market; if it is priced too low, the seller is effectively giving money away.
Here at AKKADIA, we are happy to assist you and provide detailed advice on all matters relating to the sale and valuation of property — with an assessment based on the market rather than on hope.
