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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title Benchmark study of real estate valuation methods
Organization Unit
Authors
  • Roxane Montagner
Supervisors
  • Michel Habib
  • Jacqueline Haverals
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 67
Date 2017
Abstract Text This paper presents four real estate valuation methods – intrinsic value method, hedonic property value method, discounted cash flows method and income capitalization method – with their strengths and weaknesses and their usefulness. Real estate valuations are important today as prices on the Swiss real estate market are extremely high and a reversal trend can have an important impact on property owners. To obtain a fair market value for a property is thus essential for all market players. A benchmark study has been performed on the difference between the transaction price and the appraised price to determine which method is more accurate than the others to valuate residential properties – multi-family houses, single-family houses and condominiums. The data comes from a Swiss real estate institute named IAZI. Two main results are found. First, the discounted cash flows method is the more suited to valuate multi-family houses. It is the less biased method when compared to the capitalization and the hedonic methods. Secondly, the hedonic method is the more suited to valuate single-family houses and condominiums compared to the intrinsic method. The hedonic and discounted cash flows methods are the more used in Switzerland and the ones required by the banks to grant mortgage loans.
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