Market value
This is the price at which a good should be able to be bought or sold. However, it cannot be calculated mathematically. It’s an estimate, usually made by an expert broker, who combines other values of the property with all external factors. The market value is thus assimilated to the market price.
Intrinsic value
Intrinsic value, also known as “real value”, reflects what a property is actually worth, based on its intrinsic characteristics. This includes elements such as quality of construction, age, renovations undertaken, exterior fittings, equipment and other technical aspects. It corresponds to the price to reproduce the same property identically, from which a certain percentage of depreciation due to time and obsolescence is deducted. This gives the replacement value of the property. To this must be added the value of the land to obtain the real value.
Tax value
The tax value is calculated by the tax authorities. The tax value used is that set by the canton in which the property is located. It corresponds to the purchase price.
Lease value
The rental value is a fictitious taxable rental income in Switzerland. Landlords pay taxes on the potential rental income they would receive if they rented out the property.
In this way, the rental value is intended to ensure a fiscal balance between tenants and owners. It compensates for the more favorable tax situation enjoyed by homeowners, who can deduct part of their housing costs (mortgage interest and maintenance costs) from their taxable income.
Collateral value
This is the value that the bank will use to finance the object. In other words, the bank estimates the value of a property it receives as collateral for a mortgage.
In some cases, the bank will not agree to finance the object at the price agreed between buyer and seller. The buyer will have to make up the difference between the value of the collateral and the purchase price by adding equity.
Yield value
The yield value method is a key valuation tool used in real estate. It is calculated on the basis of the income generated by the property (very often rent received).
The yield value corresponds to the annual rent, capitalized at a yield, adapted to the market and the specific asset. For example, different types of property may have different capitalization rates, depending on their characteristics.
This method provides an objective decision-making basis for potential buyers and sellers.
Indeed, if an apartment or house is rented with an open-ended lease, the value to be taken into account is not the market value, but the yield value.
With these few notions of the real estate sector, we hope you’ll never be lost again when these different notions of value are evoked!
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