Land Valuation Methods: How to Determine the Right Price?
Which methods are used in land valuation? Learn the correct land price with the sales comparison, income capitalisation and residual value methods.
What Is Land Valuation?
Land valuation is the process of objectively determining the market value of a property based on factors such as market conditions, physical characteristics, location and zoning status. Transactions made without a proper valuation can result in financial loss for one of the parties.
Core Valuation Methods
- Sales Comparison Approach: Value is determined by comparing similar properties sold in the same area within a recent period. This is the most reliable method when the market is liquid.
- Income Capitalisation Approach: Value is derived from the rental income that could be generated from a building constructed on the land. Preferred for commercial and mixed-use sites.
- Cost Approach: The replacement cost of the land is calculated. Used for large, undeveloped parcels.
- Residual Value Method: The expected post-development value minus all costs gives the land value. Widely used in project-based investments.
Factors Affecting Value
- Zoning status and build density (floor-area ratios)
- Proximity to transport axes (motorway, metro, ring road)
- Level of infrastructure completion (water, electricity, gas, sewage)
- Surrounding land uses and the area's growth direction
- Parcel geometry, frontage width and road condition
- Proximity to urban renewal zones, OIZs or major projects
Valuation Reports and CMB Licensing
For transactions requiring bank financing, an official appraisal report prepared by a Capital Markets Board (CMB) licensed expert is mandatory. This report is supported by a copy of the title deed, a zoning status certificate and cadastral data.
Kupon Araziler's Approach
We conduct independent market research for every parcel in our portfolio and establish realistic price ranges in light of comparable sales and zoning parameters. We do not include overpriced listings or parcels whose value is deliberately obscured in our portfolio.