About the importance of the location of a property

The location of a property is of equally high importance for buyers, investors and sellers, as it is one of the most decisive factors for valuation and price determination. The Latin term for "real estate" is "immobilis", which means "immovable". In principle, real estate is an immovable asset and refers to a plot of land or a building. In everyday language, however, it has become customary to use the term more for developed land or even just the building.

If you want to have your property valued, the location naturally plays a decisive role. The total price of a property is made up of the price of the land and the value of the house. The location of the property is the unchangeable factor in this calculation and is therefore of utmost importance. All factors related to the building, such as the building fabric, size or state of maintenance, are changeable. Therefore, it may well be that in a prime location, the plot of land is more relevant for determining the price than the building on it. Conversely, this means that in a less attractive location the overall price will be determined more by the house or building than by the land value.

Hamburg - Whether commercial or residential: A property's location is key to determining its value and the personal feel-good factor. Learn more in our new blog post.

Micro- and macro-location and their categories

Real estate experts further break down location into micro-location, which characterises the immediate conditions on site, and macro-location, which refers to the broader spatial environment such as the district or the region. For property purchases and sales in the residential house or condominium sector, locations are generally graded into four categories, depending on the assessment of the micro- and macro-location. These range from prime location to good, average and secondary location. Commercial real estate is also divided into categories. A prime location would be classified as 1A, followed by 1B, 2A and 2B. There are also C and D locations.

The location of a property is also a decisive investment consideration

Properties in good and prime locations can be expected to retain their value and, in the best-case scenario, increase in value. Therefore, they are more expensive. For investors, it is always interesting to consider secondary locations, as these can mean lower purchase prices and higher rental yields in the initial phase. However, value appreciation is less likely.

Location factor for private house purchase

If you are undergoing a change of location in your private life and the macro-location has been assessed, it is advisable to take a close look at the micro-location before buying a property. Consider which factors constitute a dream location for you personally. Do you see yourself in a well-developed, vibrant urban environment with shopping facilities within walking distance, or is a quiet residential street with no through traffic more to your liking? Or do you perhaps even prefer a secluded location surrounded by nature? How important is the distance to your workplace for you, and do you attach more importance to public transport or to motorway connections?

Location assessment for now and for the future

Since real estate investments are meant for the long term, it is important to assess the location not only for the present but also for the years ahead when looking for a suitable location for your future building plot. Here it is advisable to consult as many information sources as possible. For example, view development plans at the relevant building regulations office. The smarter the municipalities work, the more likely it is that this can already be done easily online. Are there already approved major construction projects in the vicinity? Use the current rent indexes and standard land values as a guide. The latter refers to the price of land in a particular area and is regularly recalculated. This will allow you to gain an idea of future development potential.

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