Engel & Völkers
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How macro-location and micro-location lead to the selection of the right property

The location of a property is the decisive factor for both its market value and its residential value. Its location can be viewed from two different angles. For this purpose, a distinction is made between macro-location and micro-location.

Both evaluation bases have a target-oriented significance for the private prospective buyer as well as for the investor in the property sector for the purchase decision. We explain the significance of the criteria, the differences and what needs to be considered when choosing a location.

What the macro-location means in relation to the location of a property

The macro-location is defined as the spatial environment of a property. This can be a neighbourhood, the city itself or, even more broadly, the region, the federal state or a higher geographical unit.

Essentially, the aim is to measure the attractiveness of a region or the city in which the property is located. For this purpose, the valuation bases are additionally divided into soft and hard criteria. The "hard" factors are measurable; there are figures, values and statistics. These include the local economic strength and its diversification, key figures on per capita income and unemployment, the transport infrastructure (airports, railway stations, level of development of local public transport, etc.), educational facilities and the structure of the population.

The pecuniary attractiveness of cities and regions is based on symbiotic advantages. The spatial concentration of flourishing and expanding companies in turn influences the structure of the people living there and can promote population growth. Colleges and universities, which attract young people and guarantee a high level of education, have a positive influence on the macro-location and the assessment of property values.

The soft factors attempt to approach the emotional side of a location's appeal. What motives can motivate people, tenants and investors to decide in favour of - or against - a property? For example, how is the recreational value to be assessed, are there interesting offers for young families? Is there a cultural spectrum of facilities and events on offer, which ultimately play a decisive role in determining the image of the region?

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What the micro-location of a property refers to

While the macro-location focuses on the big picture (macro Greek: big), the micro-location (micro Greek: small) describes the immediate surroundings of a property or building. For example, the condition of the houses in the neighbourhood, the connection to local transport and the motorway network as well as the accessibility of shops for daily needs are considered. What is the infrastructure of the neighbourhood like? Various aspects are assessed here, from the restaurant to the local recreation area for an evening jog. The orientation of the property and any permanent nuisance caused by heavy goods vehicles or other sources of disturbance such as aircraft noise are also taken into account.

If it is a multi-family property or a complex of condominiums, the assessment of the micro-location is continued inside the property. Here, too, there are popular and less attractive locations. Flats on the ground floor are often unpopular, whereas those facing the quieter rear with a garden view or the inner courtyard location are much more in demand. All of these micro-location criteria have a direct influence on the price per square metre that can be achieved.

Depending on the assessment of the macro and micro location, a four-level classification has been established for the residential sector, ascending from basic to average to good and best location.

Commercial properties are also categorised to determine their value. These are 1A, 1B, 2A, 2B, C and D.

What needs to be considered when choosing a location?

The decision in favour of a property is rarely a short-term one. Investors see their investment as long-term, just as the private buyer or tenant assumes that the decision is for the long term or even for life.

Investors match the characteristics of the micro and macro location with their letting strategy and their preferred tenants. Private individuals also have wishes for their future home that should match their personal lifestyle and priorities as closely as possible.

It is therefore important not only to refer to statistical surveys from the past or the current situation, but also to develop a visionary assessment for the coming years. Are developments stabilised, emerging or possibly declining? You can obtain interesting information in this regard, for example, by inspecting development plans and already approved building projects at the respective building regulations office.

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