How to calculate the market value of property in the Philippines

What do you need the market value for?

Buyers must know how to calculate the market value of property in the Philippines to make an informed investment decision and guarantee they pay a reasonable price. It helps buyers determine whether the home fits their spending limit and financial objectives.

Market value enables property owners to maximize their profit potential and set a competitive asking price when selling property in the Philippines. It allows them to set a fair rental rate that reflects the market’s state depending on the property’s market worth.

Different methods to calculate the market value of property in the Philippines

There are several ways to determine the market value of a property in the Philippines. Real estate agents and appraisers often use these ways to understand how much a property is worth. Those wondering how to calculate the market value of property in the Philippines can use one of the three standard methods explained below.

1. Comparative Market Analysis (CMA)

The Comparative Market Analysis (CMA) is a popular way to calculate the market value of property in the Philippines. This approach involves comparing the subject property with similar properties recently sold in the same neighborhood. Assessors can determine the market worth of the subject property by analyzing the sales prices of these comparable properties and accounting for elements like size, location, condition, and amenities. The CMA approach is beneficial when there are enough recent comparable sales in the market.

2. Cost approach

The cost approach considers the cost of rebuilding or replacing damaged property. It requires figuring out how much the land costs and how much it will cost to build, including materials and work. When using the cost approach to calculate the market value of property in the Philippines, appraisers also consider degradation and obsolescence. Although this method may not be accurate for older homes, it approximates a property’s worth at its lowest value.

3. Income approach

The income approach in the real estate sector is frequently employed to assess the worth of properties that generate revenue. This approach considers the possible gross income the property could produce to calculate the market value of property in the Philippines. When capitalization rates or revenue multipliers are applied to a property’s first-year Net Operating Income (NOI), the property’s worth can be calculated. This method works best for commercial and investment properties with enough market data to offer reliable inputs and parameters. The NOI is computed by deducting operating expenditures (excluding debt payment, income taxes, and accountant-applied depreciation charges) and subtracting vacancy/collection loss from total potential income.

Which factors influence the market value?

There are various aspects to consider to calculate the market value of property in the Philippines. Whether a property’s value rises or falls over time due to these factors can have a significant effect. A buyer or investor must know these elements to make wise judgments. The following seven factors influence market value:

• Location: The property’s location, with good access to amenities like parks, malls, hospitals, and schools, and its location in a growing neighborhood positively impacts its value in calculating the market value of property in the Philippines. A property in one of the best locations in the Philippines may have a higher value than those in less attractive areas.
• Development: Increased growth and development in neighboring areas can positively impact property values when calculating the market value of property in the Philippines, as new infrastructure, businesses, and transit options attract more investors and residents.
• Accessibility: The market value of a property is greatly influenced by its accessibility through various transportation options, with higher values associated with properties that are conveniently accessible, as decreased transportation costs lead to an increase in property value.
• Renovation: The property’s condition and renovation status directly impact its market value when calculating the market value of property in the Philippines, as proper maintenance and improvement can increase its worth. At the same time, neglect or structural issues can reduce its value.
• Market conditions: Real estate value is affected by interest rates, supply and demand, and economic conditions, resulting in higher prices in a seller’s market and lower prices in a buyer’s market.
• Size and layout: To calculate the market value of property in the Philippines, larger properties or attractive and practical layouts often command greater prices than smaller or poorly constructed homes.
• Features and amenities: Desirable amenities and features, such as parking, green areas, pools, gym facilities, high-quality finishes, and smart home technology, can increase a property’s value.

Frequently Asked Questions (FAQs)