Whether selling or purchasing a property, knowing how to calculate the real estate market value is vital to prevent legal disputes, investment pitfalls, or being at a disadvantage. Various factors influence the market value of a property. Investors and property owners should know these factors to make well-informed decisions before closing a deal.
 
Thus, we’ve listed below the factors that affect the real estate market value in the Philippines, which will benefit investors and those planning to sell their properties.

5 Factors that Affect the Real Estate Market Value in the Philippines

1. Economy

One of the top factors affecting the real estate market value in the Philippines is the country’s economy. It is commonly calculated based on different economic indicators, such as the gross domestic product (GDP), employment, manufacturing enterprises, and cost of services and goods. Generally speaking, real estate will be stagnant if the economy is sluggish.
 
The market value of real estate properties declines when the economy is in recession. On the contrary, many capitalists opt to invest during this time since they can purchase property at a lower value. Hence, buying a property when the economy is stagnant is a wise investment decision.

2. Location & Accessibility

Another factor that significantly affects market value is the location and accessibility of the property. Regardless of function, location is critical when choosing a property. For instance, if investing in commercial properties, buy land in an urbanized and well-developed area, especially with great transport systems.
 
However, if you prefer a resort or resthouse, look for a location ideal for retirement or away from the hustle and bustle of big cities, such as mountainside or beachside properties. Accessibility is also a major factor in real estate. Properties near hospitals, schools, shopping malls, public markets, and central business districts tend to have higher market value.

3. Features & Amenities

The property's market value will also based on its features and amenities, like parking, swimming pools, and open and green spaces. A property that offers security, privacy, and smart technology is attractive to many buyers, especially for younger generations — the same way avant-garde facilities make properties more valuable.
 
The property’s value can also increase depending on its decorative features, from granite flooring and marble bathtubs to opulent lighting devices, floor-to-ceiling windows, and HVAC systems. So, if you’re eyeing a fully furnished modern condo unit or a house in a gated community, expect the property’s market value to be pricier.

4. Size, Layout, & Condition

Home buyers and investors have various specification requirements considering their intended use. Some prefer properties with spacious interiors, ample parking areas, or wide open spaces. Others opt for minimal, modern, and functional spaces. That’s why the size and layout of the property matter when calculating market value.
 
Properties with extensive green spaces will likely attract those in the agricultural business or buyers investing in recreational facilities. Meanwhile, many home buyers today prefer a minimalist lifestyle, making condo units in demand. Additionally, the property's condition has a huge effect on market value. The property's value is reduced if neglected and requires repair of structural issues.

5. Interest Rates

Apart from the economic conditions, supply, and demand, interest rates significantly influence the real estate market value. If the interest rates are low, the mortgage value will also be lower. Interest rates also change every year. When the interest rates increase, the borrowing cost will also go up. So, buyers will back out of the market, resulting in less demand and lower prices.
 
But for experienced investors, this downturn is a profitable opportunity. Therefore, interest rates directly affect the property’s market value.

Purchasing a property requires diligence to avoid pitfalls and legal disputes. Whether buying a home of your own or investing in real estate, calculating the market value of a property is vital in making informed decisions and negotiating reasonable prices. Market value refers to the property’s calculated or estimated amount, which the buyer should pay to the seller. Hence, knowing how to calculate the market value of a property is essential to both buyers and sellers.
 
In this article, we will share different ways to calculate the market value of real estate property in the Philippines to help determine if it fits your spending limit or to maximize potential profit.

How to Calculate the Market Value of Real Estate Property in the Philippines

Comparative Market Analysis (CMA)

One of the most popular ways to calculate a property's market value in the Philippines, CMA is a strategy wherein appraisers compare the property with similar properties up for sale or sold within the same area. Through this approach, assessors will calculate the said property's market value by evaluating the selling prices of comparable properties and considering various factors, such as location, size, amenities, and condition. However, the CMA approach only applies if the market has sufficient and latest comparable sales.

Cost Approach

Another way to calculate the market value of a property in the Philippines is through the cost approach. The market value is determined based on the cost of replacing or rebuilding the damaged property. To use this method, determine how much the land costs and the cost of building or rebuilding the property, including the labor and materials.
 
Apart from that, appraisers use this approach to calculate a property's market value in the Philippines while considering obsolescence and degradation. On the other hand, the cost approach won't be beneficial for older homes. Since it considers repair and rebuilding costs, the estimated market value won't be accurate, and its approximates would be at its lowest.

Income Approach

For those considering investing in the Philippine real estate market, the best way to calculate a property’s worth is through the income approach. This method is frequently applied to appraise the market value of properties that generate profits. It will also benefit owners selling a property in a central or touristy location, such as Metro Manila, Baguio, Laguna, and Cavite. With this method, the appraiser would consider the property’s potential gross income to calculate the property’s market value in the Philippines.
 
Once revenue multiplies or the capitalization rates apply to the subject property’s first-year

​Net Operating Income (NOI), you can calculate the property's worth. The income approach is best for investment and commercial properties with ample market data to provide trustworthy parameters and inputs. To compute NOI, deduct the operating expenditures (except income taxes, debt payments, and depreciation charges) and collection or vacancy loss from prospective potential income.

Summary

In summary, knowing how to calculate the market value of real estate property in the Philippines is crucial for all parties involved. When selling a property, it is best to estimate its amount by comparing it to similar properties in the market. Buyers should also consider using the cost approach if buying a damaged or underdeveloped property that requires repair or rebuilding. 
 
Meanwhile, owners will benefit from the income approach, given the properties are within or close to central business districts or tourist spots. Therefore, the method used to calculate the market value depends on various factors to ensure the buyer can get it at a fair price while not disadvantaging owners.