Market price definition: what is market value?
Market value is the price at which a property could be sold under normal conditions, between a seller who is not forced to sell and a properly informed buyer. It is therefore not limited to the asking price or to the price hoped for by the owner.
Market price definition and difference from the sale price
The market price definition is based on one central idea: the price must reflect what a solvent buyer would actually be willing to pay at a given moment. In real estate, the property market price therefore depends on the location, the condition of the property, the scarcity of supply, comparable transactions and the level of mortgage rates.
A common mistake is to confuse market value with the advertised sale price. An apartment may be listed at CHF 950’000, but if serious offers are around CHF 880’000, the real estate market value is probably closer to CHF 880’000 than to the asking price. Conversely, in a highly sought-after area, informal bidding between buyers can push the price above expectations.
Real estate market value and mortgage financing
For a bank, the market price of a property is not automatically the price you pay. It may retain a more conservative value, especially if the purchase price appears higher than recent comparables. This distinction matters, because the loan-to-value ratio is often calculated on the value retained by the lender, not only on the price signed at the notary.
Example: you buy a property for CHF 1’000’000, but the bank estimates its market value at CHF 930’000. Even with 20% equity on the purchase price, your financing may become more difficult, because the bank uses a lower basis. In practice, the property market price therefore directly affects your equity, your first and second-rank mortgage, and your room for negotiation.
Resources about market value
- Buy at the right time
- SNB policy rate: impact on prices and mortgage loans
- Energy renovation: consequences for the value of your property
