Blog

What Are The Factors That Affect The Value Of A Property?

Whether you are selling or buying an investment property or home, you need to consider what the property is really worth. So what are the factors that effect the property value?

1. Location

   The location of your property is one of the most important factors that affect real estate values. Is it close to restaurants, schools, shops, public transportation? Is it in a tourist destination? Is it close to the city center? The more popular and accessible an investment location is, the more valuable the property will be.

2. Home Size and Usable Space

   The market value of a real estate property is usually mentioned in terms of price per square meter– the total sales price divided by the property’s square meter. A property’s value is determined by the usable space. Garages, unfinished basements, and attics are usually not included in usable square meter. It is spaces such as bathrooms and bedrooms that can significantly increase the home value.

3. Age and Condition

   Age is another factor that plays a major role in determining property value. Usually, the newer the property, the more buyers would be willing to pay for it since it does not require any major real estate renovation or repairs. Besides age, property buyers also consider the condition of the structure. People would rather buy a 15-year old house that is well maintained than a newer one that needs major renovation.

4. Upgrades and Updates

   Upgrades, updates, and home renovations can significantly increase the value of your property, especially older properties that might have outdated features. Kitchen and bathroom renovations are some of the improvements that could have the biggest effect on the home’s value.

5. Supply and Demand 

   The push and pull of supply and demand has a major influence on the value of property. If there is a high demand but fixed supply, the price of properties will rise as more people attempt to buy. Supply can be increased by splitting large existing structures into several smaller units or building entirely new properties. When supply exceeds demand, prices will then start going down.

6. Real Estate Comps

   If you want to know the value of a property, check the sale prices of comparable properties (real estate comps) that were sold recently in the area. The properties could be comparable in terms of:

• Type of home (Apartments-Villas-Duplexes)
• Year built
• Square Meter
• Number of bathrooms and bedrooms
• Location (near a mall, beach or busy street for example)

7. Planning/Building Regulations

   Constructing a property today requires building regulations (which include the technical aspects of the construction process) and planning permission (which includes the design, shape, and size of the property). Failure to adhere to these regulations could result in a property being demolished. The amount of planning permission and building regulations required can, therefore, have an impact on the value of the property.

8. Interest Rates

   The level of interest rates is one of the major factors that affect property value. If the Reserve Bank decides to increase the interest on loans, lenders will follow suit. This will mean that borrowers will have to pay a higher monthly mortgage repayment. Expensive mortgages mean that properties will be sold at a higher price. On the other hand, a reduction in interest rates means that property will be more affordable.

9. Renovation Potential

   Most real estate investors and home buyers are interested in the renovation potential of a property. This could be the potential to increase the floor space, add an extra bathroom or extra bedroom, add an outdoor patio or add a pool. If there is an allowance for a buyer to personalize or improve a property, then the value of the property will be higher.

10. Economic Factors 

    The economic conditions of an area will have an effect on people’s ability to sell or buy an investment property. When the economy is booming, there will be more jobs and people will earn more money. As the buying power of people increases, they are more likely to invest in a new home or second home. The increase in demand will eventually result in higher property prices. On the other hand, if unemployment increases and wages drop, less people will be able to afford a home. Subsequently, the prices of property will also drop. It is therefore very important to keep up with the prevailing conditions of an area before setting the price for a property.

Conclusion

It is important to know what a property is worth before buying or selling. This is why you should work with professional real estate agents who have some experience with property valuation and appraisal in the local area.

Chady Melhem | Property Consultant

Call me for any advice you may need!