Illusion No. 6: The location of a property is simply everything …

“The three most important criteria when evaluating a property are 1st location, 2nd location and 3rd location.” In reality, however, it is not quite that simple. Below we explain the other criteria that make a property attractive and the valuation methods used to determine the value of a property.

Differentiation of location quality criteria

• Macro-location
  The macro-location assesses the quality of a region and the municipality. The tax situation should also be mentioned, which is very important for the property value and has a strong influence on the land price. The distance to cities and conurbations as well as transport links are also decisive factors in determining what a buyer is prepared to pay for a property.
   
• Micro-location
  The micro-location refers to the situation within the neighborhood. The micro-location is about orientation, sunlight, views and emissions, such as from a nearby railroad line or road. Each property should be inspected at different times of day so that any emissions can be safely excluded or weighed up. The land register should also be consulted and easements, reservations and reservations should be checked carefully. It is also essential to go to the building authority and check the building regulations carefully. Location is not the same as location. When setting the price, a self-buyer proceeds differently to an investor. A distinction is made between absolute and relative land value.
   
• Absolute land value
  The absolute land value is a comparative value. For example, transaction data from neighboring properties is used here. The principle is: “What is normally paid on average in such a location?” However, caution is required in individual cases. In particular, properties may have different possible uses, and there may also be easements on the property to be valued that restrict the development possibilities and thus influence the land value.
   
• Relative land value
  The relative land value expresses the land value in relation to its development potential. The land value is calculated using a complex valuation method that can only be used by professional Real Estate experts. This is also referred to as a backward calculation, which has the following schematic (highly simplified) structure:

Real estate tip: Finding the balance between the value of the location and the property

The land value is normally between 20 % and 50 % of the market value of a property. The rule is that it is more expensive to build on expensive land than on cheap land. Particularly when reselling, it should be noted that an unfavorable ratio between land value and building value can lead to problems. If this rule is not observed, it is quite possible that the investment costs will no longer be recognized by the market later on. It is worth discussing
an investment with a real estate expert in advance and adjusting the construction costs to the quality of the location.

PDF Illusion No. 6

Author: Claude Ginesta

Claude A. Ginesta is a federally certified real estate trustee and the CEO and owner of Ginesta Immobilien AG. The company was founded in 1944 and specializes in real estate sales in the Zurich and Graubünden regions. For properties of supraregional significance, the company operates as a real estate broker throughout Switzerland via its branches in Küsnacht, Horgen, and Chur.

Publisher of the Illusions series: Ginesta Immobilien AG, www.ginesta.ch