How to estimate the value of land?

There are several ways to determine the value of a plot, especially since each plot has its own specificities. First, it is essential to determine what type of land you own; whether it is constructible, developed, located in a development zone, an agricultural zone or a zone to preserve. These are essential notions to define before estimating a land, which will help you define the right selling price to your plot.

What type of land would you like to appraise?

• Built plot: This is a land covered by one or several constructions, which can be a house, a flat, a commercial premises, etc...

• Building plot: This is land that can be built on. The land must be able to:
  - Support the weight and loads of the construction
  - Be developed or has a possibility to be developed
  - Comply with the legal authorisations related to the construction.

• Unbuildable land: Not suitable for construction if:
  - The land is located in a flood-prone area
  - Has landslides
  - Is located in an area to preserve.

• Developed land: Is connected to the sewerage, water, gas and electricity networks and has one or more access roads

• Undeveloped land: This refers to land that is not developed.

Estimation of land according to the municipality allocation plan

It is possible that land is constructible and developed, but is not part of a development area by the municipality. That is why it's important to identify to which area your land belongs. Each canton has its own definition of land areas. Here are the main areas found in the majority of cantons:

• Development areas: They are intended for residential construction. The building areas are delimited throughout the entire municipal territory by a development plan.
  
• Industrial and artisanal areas: These are intended for industrial, artisanal and railway constructions.
  
• Public utility areas: Are reserved for the Canton, municipalities and public institutions or foundations.
  
• Agricultural and vineyard areas: Considered as "not suitable for building", but you can apply for the construction of a farm or a farmhouse. Renovations or reconstructions of existing facilities are also permitted if the original building was legally erected.
  
• Areas to protect: These are areas which cannot be built on and which must be protected, i.e.:
  - Built sites: such as monuments of art or architectural history, antique buildings.
  - Natural sites: sites and landscapes, plant and mineral species of biological, scientific, historical, aesthetic or educational interest.
  
• Intermediate area: These are lands whose status use will be defined in the coming month or year. They are not suitable for building but may become so, following a change in the allocation plan.
  

Where and how to obtain this information related to the value of the land?

In order to obtain all the information you need to evaluate your land, you will have to ask your commune or check the official website of your canton, which can provide you with the documents you need to determine the value of your property.

Make sure to ask for the following documents:

• Plan of the land register: This includes the identity of the owner, the rights of lien and the regulations related to the land. You can obtain an extract from your municipal land registry office.
  
• The Regional Development Plan: This identifies the area your plot belongs to. The plan is created by the municipality concerned.
  
• The Cadastral plan: This shows the boundaries of the land in relation to neighbouring plots. The cadastral plan can also be obtained from the Land Registry Office.
  
• The Local urban planning: This identifies the building surface area of your land and the main urban regulations of the municipality, which will help you define the potential of your land and therefore its value. You can obtain it by contacting your local council.
  
• About the development of the plot: To develop your plot, you will have to ask your commune about the connection to the public networks and the related costs.

How is the price of land calculated?

Once you have collected all these elements and identified the specifications that define your plot, you can finally begin the estimation.

Estimating a raw land in a development area

The valuation of the price of land is specific to each canton. In the canton of Geneva, for example, when the land has been classified in a development area by the municipality, it is the Canton that sets a maximum price at which the land can be purchased. The owner retains a margin of negotiation on this price following compensation or supplements to be paid by a potential developer.

This maximum price is determined according to the land use index, i.e. the ratio between the gross surface area of the land and the maximum authorised living area.

That means land with a surface area of 800 m² is not necessarily 100% habitable. The living area can be limited by pipes, sewers, which are located under the land and delimit the development area. This is also the case when the land is close to a forest or a river, some distances must be respected and therefore it reduces the living area in order to protect these natural elements.

The higher the land use index, the more valuable the land will be, as it will have a bigger building capacity. The price of land should therefore not be measured in relation to its total surface area but in relation to its living area. You will find this land-use index from your municipal administration.

As an example, you will find below for the canton of Geneva, the minimum density indexes applicable in the development area in 2019:

• 2.5 in development area 2
• 1.8 in development area 3
• 1 in development area 4A
• 0.8 in development area 4B.

Once you have found your Land Use Index (LUI) for your land according to its development area (identified in the Zoning Plan obtained by your municipality) you can carry out your land value calculation. If your land belongs to development area 4B, your coefficient will be 0.8, you must multiply your coefficient by the surface area of your land:

IUS x Total surface area of the plot = Building surface area
0.8 x 800 m² = 640 m²
You will be able to build on 640 m² of your plot. 

Finally, as explained, the price of the land depends on the type of area and is specified by the Canton. It can vary from CHF 450 to CHF 1,238 per m² depending on the Land Use Index. Also in Geneva, in 2019 the ceiling price for a land with a coefficient of 0.8 is CHF 833.

Building area x Ceiling price per m² = Ceiling price of land
640 m² x CHF 833 x CHF = CHF 533,120.

To evaluate the price of a building plot other cantons use the COS (coefficient of occupation of the land) which is the ratio between the floor area and the surface area of the land or the CUS (coefficient of usability of the land) which is the ratio between the built area and the surface area of the land. Once again, it is essential to contact your local authority, as they will tell you which index or coefficient to use in order to estimate your land.

Estimating a land with a house or another construction

For a new house, a promoter makes its calculation based on the cubic metre of construction volume. The volume takes into account any kind of construction such as a house or a garage. For a standard house, the price per m³ is between CHF 650 and CHF 800.

m³ of the building volume x price /m³ = Price of the house
900 m³ x CHF 700 / m³ = CHF 512'000.

You can find information about the volume of your house in the ECA which is part of your insurance for your house.

For a standard house, there are several ways to estimate its value, either online, by analysing the market, thanks to the prices / m² average, to estimate your house yourself see this article.

The estimation of an undeveloped land

If your plot is already connected to the main networks you can add the development costs to the price of the land, here are the different elements to include into the development costs:

• The land charge: This is specific to each municipality, it is the ratio between the cost of the work to extend the network and the remaining surface area to be built.
  
• Other taxes related to the different connections: They are fixed according to the number of amperes, sockets, pipe diameters, etc...
• Gas connection 
• Clearwater supply
• Sewage treatment
• Electrical connection
• TV and telephone connection

To get an idea of the cost of developing land, you can contact your local council, which will redirect you to the relevant services and can send you personalised quotes.

Estimating a land outside of a development area

For land that is not in a development area, the price is mainly determined by supply and demand. Several methods exist to estimate the land:

Using prices per m² of land

You can find the average price per square metre of land online on the websites of your municipality or canton. This average price is calculated by averaging the transaction prices of the land of the same type, in the same town.

For example, if a building plot has been sold at CHF 800 / m² in your town and another at CHF 1'000 / m². The average price per m² in the city of a land will be: (800 + 1'000) / 2 = CHF 900 / m².

The greater the number of transactions, the more accurate the average price will be.

The comparison method

If your town or region does not publish prices per m² of land, you can carry out this study manually by searching for land that is currently for sale in your town.

On a real estate portals, you can search in your town or nearby for plots of land similar to yours.

In the same way, you can average the prices per m² of land currently for sale. In order to refine your price, you can increase or decrease it according to several factors that we will look at below.

The residual value method

For investors who wish to use your land for a construction project. Their objective will be to estimate the profit they will make from building on your land.$

Their calculation will therefore be done as follows:

Investment costs - Return value

Investment costs include:

• Soil survey 
• The price of the land
• Demolition of the existing building (if necessary)
• The equipment of the field (if necessary)
• Boundaries (if necessary)
• Construction costs (architect, project owner, materials, etc.)
• Marketing costs (client prospecting, communication support, sales and administrative procedures).

The yield value:

For an investor, the main concern is to know how many housing units can be created and how much they can be sold for.

If there are 1000 m² of land with a building area of 800 m², the investor may be able to build 8 plots of 100 m² and sell them each at CHF 500,000.

The yield value will be 500,000 x 8 = CHF 4,000,000.

The investor will then have to subtract the construction costs from the yield value to know whether the investment is profitable or not.

In the case of an individual who wants to know whether it is more profitable to buy land and have a house built or to buy a house that has already been built , the analysis of the land is essential in order to know what additional costs should be added to the construction budget.

Be aware that banks also analyse your project from top to bottom and if your land requires too much effort (equipment costs, soil remediation, etc.), they may refuse your application for financing or require that your land does not exceed a certain amount to fit within your financing capacity. 

What factors affect the price of the land?

The acquisition of land takes place when a buyer has a building project generally for living in, so the land must meet the following criteria:

A good location: If the land is to be used as a main residence, it should ideally be located close to public transport, shops and schools. On the other hand, if the land is outlying it will be less valuable unless there are building projects in the city such as a new bus line, motorway or new shopping centre. In this case, the land will be a good investment because it will increase in value in the coming years, so it is important to check the allocation plan for future projects in the city.

Municipal and cantonal taxes: It is worth checking a town's municipal taxes. The lower are the taxes, the more people will be attracted to the town, and the higher the demand, so that landowners can take advantage of this to increase the price of their land in line with the increase of demand.

Specific characteristics of the land: The type of soil, the shape, the size of the land, are elements that will inevitably have an impact on the cost of construction. The more constraints the land has, the less value it will have:

• Sloping land: If the slope is steep, construction will be more complicated than on flat ground, as the house will have to adapt to the relief and ensure that it is stable for construction. Architectural choices will also be limited due to the complexity of the project.
  
• Restricted accessibility: If access to the land is difficult, construction may be impossible if trucks or cranes cannot access the land. If the builders are able to access the site by using additional facilities, additional labour costs may be charged because it will require more effort.
  
• The nature of the soil: If the soil is rocky or silty, there will undoubtedly be costs related to the remediation of the soil in order to be able to build on solid foundations.
  
• Dimensions: The narrower the surface area, the less freedom there will be in terms of the layout of the house or the distance from the neighbours. This in order to preserve everyone's privacy.
  
• Easements: These are the constraints or advantages that weigh on a property. It is important to note all the constraints that are assigned to land. Servitudes are diverse and varied. They can be easements of passage that allow access to a landlocked property to the public highway, easements of view that allow preserve privacy, etc...
  
• The shape of the land: This will have an impact on the design of the house and will also reduce the choice of structure, architecture and even the location of the construction on the land.
  
• Urban regulations: It is essential to familiarise yourself with the town regulation in terms of the urban planning before buying land in order to be aware of the restrictions. Several conditions can be imposed, such as the nature of the buildings, the number of floors or the shape of the property. This can go as far as the external appearance of the buildings such as the colour of the façade or the use of certain materials. Here again, the more restrictions you have, the less interested buyers will be, which automatically lowers the value of the land.
  
• Land use index: It is essential to find out the land use index (LUI) of the land before buying it. If you find land on the market at a very advantageous price, there might be elements not indicated in the offer, like a very low LUI. As indicated, even with a total surface area of 800 m², if its score index is only 0.4, you will only be able to build on 320 m², i.e. less than half.

The type of land and the area plan:

• Undeveloped land will be much less valuable than a developed plot, as the costs of developing a plot can range from CHF 50 to CHF 200 per square metre. The cost increase with the distance between the land and the networks, and the further away the land is from the network, the higher the costs of developing it.
  
• If the land is not suitable for building, with the exception of agricultural land, the land will be of very little value as it has few possible uses. It will therefore be the supply and demand market that will determine its the price of unbuildable land.

• Agricultural land is only valuable if its return value is higher than the investment related to the purchase of the land, its maintenance and its agricultural exploitation. Find out more about the valuation of agricultural land.
  
• Land that is in the development area, immediately increase in value, as they are very rare in Switzerland and are in great demand, whether by property developers or private individuals seeking to build their own property. Every year, new land is allocated into the development area, to avoid overbuilding over a given period of time and exhausting the reserves of residential land.
  
• For intermediate areas, the ideal solution would be to wait until the status of the land changes following a change of use by the municipality, as an intermediate area as it stands is of very little value. In the years to come, it is possible that it will become an agricultural area or even a building area. To get an idea of the change in land use plans, you can check the municipal master plans which indicate which areas will potentially be affected in the coming years depending on the change in the number of inhabitants.