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

Real Estate Philippines | How To Calculate the Market Value of Your Property

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.