What is the land value and how is it calculated?

The invisible price driver: What is the land value ?

The land value of a property (also called the land value) refers to the value of the undeveloped land. Imagine your house disappeared overnight. What would the empty field it stood on be worth? That's exactly what the land value of a property is .

It is decoupled from the building structure. One and the same prefabricated house can have a total value of 800,000 Swiss francs in Thurgau, but 3 million in Zug. The difference of 2.2 million Swiss francs is almost exclusively the land value of a property . It reflects scarcity, location quality, and above all, development potential.

The influencing factors: Why not all countries are the same

The land value of a property is extremely location-dependent . The following factors drive it:

1. The macro situation (The region)

The economic strength of the region is crucial. In cantons with low taxes and many jobs (Zug, Zurich), demand is high and supply is limited. This drives up the land value of a property .

2. The micro-location (the neighborhood)

Here we get into the details. Views, sunlight, tranquility, and proximity to public transport all drive up prices. A plot of land with a lake view has a significantly higher land value than one located 500 meters further back in the shade.

3. Legal usability (zoning plan)

This is the most important technical factor. What is allowed to be built in the countryside?

The so-called utilization factor (or building volume factor) determines how much living space may be built per square meter of land.

• Example: On plot A you may only build a single-family house. On plot B (of the same size) a five-story apartment building may be built.

Plot B has a much higher land value for a property because it offers greater earning potential. The land value of a property is therefore directly linked to building rights.

4. Development

Is the land ready for construction? Are water, electricity, and road connections available? "Raw" land designated for future development has a lower property value than a fully developed plot, as the buyer still has to pay the connection fees.

How is it calculated? The methods for determining the results.

Calculating the land value of a property is often more difficult than determining the building value, as there is less comparable data available (vacant lots are rarely sold). There are two main methods.

1. The comparative value method

This is the ideal scenario. You look at what neighboring properties have cost recently.

If an empty plot of land next door was sold for 1,000 CHF/m², that is a strong indicator of the land value of a property on your property.

• Problem: In built-up areas, there is hardly any empty land. Comparable data is often lacking.

2. The residual value method (backward calculation)

This method is often used by investors to determine the land value of a property . They ask: "What can I build here, and what is the end product worth?"

The simplified calculation is:

• What is the market value of the completed new building (e.g., 3 million CHF)?
• What will the construction cost (e.g., CHF 1.5 million)?
• What are the overhead costs/profit margin (e.g., CHF 500,000)?
• Result: The remainder (residual) is the maximum land value of a property (here 1 million CHF).

This method mercilessly demonstrates that the land value of a property is actually what remains after subtracting the construction costs from the income.

3. The location class method

Here, the land value of a property is estimated as a percentage of the total value.

• For a new house in a mid-range location, the land often accounts for 20–30% of the total value.
• For an old building slated for demolition in a prime location, the land value can account for 90–100% of the property price (since the house is worthless).

Estimators use tables (location classes) to determine this proportion.

The land value of a property in the tax return

Caution: The "tax value" of land on your tax return is often much lower than its market value. Cantons often assess land conservatively. Don't confuse this administrative value with the true land value of a property that you could achieve upon sale.

Who can help me with the evaluation?

For laypersons, it is difficult to correctly interpret the utilization factors and location classes in order to quantify the land value of a property .

Classic experts

Architects or surveyors can perform precise calculations. They check the zoning plan and the register of contaminated sites. This is precise, but it costs time and money.

Innovative support: heyloft.ch

In the digital age, there are faster ways. heyloft.ch offers modern solutions.

The digital assistant "Loft" specializes in linking data points.

• Potential analysis: Loft doesn't just look at what is , but at what could be . It analyzes whether the land value of a property would be higher if the existing house were demolished and a new one built (Best and Highest Use).
• Data basis: Loft compares thousands of transactions and incorporates zoning plans. This gives you an indication of a property's land value that goes far beyond gut feeling.
• Independence: Loft has no interest in driving down the price. It provides a neutral assessment of a property's land value . For owners who want to know if they're sitting on a goldmine, this is the ideal first step.

Why land value will rise

Switzerland is growing, but the land area is not increasing. Spatial planning (inward densification) is artificially reducing the availability of building land.

This means that the land value of a property will remain the long-term driver of your wealth. The building on it deteriorates and needs renovation – the land increases in value. Those who invest in real estate are primarily speculating on the increase in the land value of a property .

Conclusion

The land value of a property is the economic basis of your ownership. It is the price for the location, the right to build, and the scarcity of land. It is not determined by bricks and mortar, but by zoning plans and the attractiveness of the region.

While buildings lose value, the land value of a property is usually the anchor of value that protects real estate from inflation. The calculation is complex, as it often has to be calculated backwards from the potential income (residual method).

Don't rely on outdated tax values. To understand the true potential and current land value of a property , you need up-to-date market data.

Loft 's analyses to gain clarity about the most valuable part of your property.

Glossary

• Land value of a property: The market value of the undeveloped land, regardless of the building standing on it (also called land value).
• Utilization ratio (AR): A key figure in building law that determines how much living space may be built per square meter of land – a major driver for the land value of a property .
• Residual value method: A calculation method in which the construction costs are subtracted from the potential sales proceeds of a new building in order to determine the maximum land value of a property .
• Development : The provision of water, electricity, and road access to a property. Only developed land achieves the full value of a property .
• Loft: The AI-powered digital assistant from heyloft.ch, which helps owners assess the land value of a property through data analysis and potential calculation.