Management April 23, 2020 Last updated November 1st, 2021 2,476 Reads share

8 Key Factors That Influence a Property’s Value

Image Credit: DepositPhotos

Whether you’re planning to buy or sell an investment property or home, it would work wonders for you if you knew the worth your intended property.
The question is, how would you form an accurate approximation of the real value of the property?
From supply and demand through to location, size, investment potential and planned infrastructure projects, there are a handful of factors that can affect a property’s worth.

We have outlined some of the most crucial factors that influence the value of a property. Keep on reading to find out.

1. Location

One of the most critical factors that affect real estate values is the location of the property. An appraiser determines how much a property’s worth based on the location of the property. Appraiser’s look for a few primary indicators, such as:

  • Proximity to shopping malls, restaurants, recreational centers and hospitals
  • Employment opportunities
  • The quality of local schools
  • Distance from the nearest public transport hub

These factors are not independent of one another. For example, as part of a reasonable commute to and from work, many parents can drop their kids off and pick them up along the way. That would be very convenient! The preferences, as mentioned above, would make for an immensely valuable house.

There’s also the fact that some suburbs may have a better reputation than others due to factors such as lesser crime rates, employment opportunities, or availability of schools. Two properties just a street apart can substantially differ in value, simply because they’re located in different postcodes.

2. Size and Usable Space

The overall size of a property will also influence its worth. The larger the property area and house, the more expensive it will be in the market.

The market value of a real estate property is mentioned in terms of price per square foot. The total sales price is divided by the property’s square footage. For example, a 2,000 square foot home sold for $40,000 would have a price per square feet of $200.

A three-bedroom apartment will probably fetch more price than a two-bedroom apartment in the same area. At the same time, features such as garages, swimming pools, extra bathrooms can all have an impact on property value alongside its size.

Lastly, a home’s usable space matters when determining its value. If you have a 2,000-square-foot home with a 500 square-foot garage, that’s only 1,500-square-feet of liveable space. Customers and appraisers give a great deal of importance to liveable space.

3. Age and Condition

Age is another factor that plays a vital role in determining property value. Newer houses, usually appraise at a higher cost. Buyers would be inclined towards buying more modern properties since it does not require any significant renovations or repairs.

Alongside age, the condition of the structure is considered essential. Some homes have been built decades ago and are still valued far more than modern homes. People are willing to buy old houses which are well maintained or have historical significance than a recently developed one that needs a good amount of renovation or repairs.

4. Real Estate Comps

One of the best indicators of a property’s value is the sale prices of similar properties in the same neighborhood that were sold recently. These comparable properties located in the same area, with similar size, condition and features are referred to as “comps”.

The properties could be compared in terms of:

  • Time – Look for properties that have been recently sold; the more recent, the merrier.
  • Age – The year it was built.
  • Size – Square footage of the property.
  • Facilities – Number of bedrooms and bathrooms, availability of garage, swimming pool, etc.
  • Location – For example, is it near a mall or a busy street. Look for comps that have the same placement.

Whether it’s a home or investment property appraisal, a comparative market analysis conducted by an agent, most real estate experts will rely heavily on recent nearby transactions on comps to estimate the property value.

5. Design and Quality

In real estate business, first impression counts a lot.

The outer look of any house can instantly add or subtract a drastic amount of money from its value.

An open layout consisting of fewer partitions and walls presents itself to be more spacious, and this illusion can convince home buyers to pay more as space looks more massive than its actual size.

A property manufactured with high-quality materials is likely to have a higher value. Also, in recent time there’s a huge market for eco-friendly property among the buyers. With the increasing price of electricity and gas lines, items like solar panels, insulation etc. can add value and appeal.

6. Economic Condition

The general performance of the economy can also have an impact on the property market. For instance, if the economy is experiencing booming growth, employment and labor conditions; more people will also be able to purchase a property, which inevitably leads to rising property values.

The performance of the real estate market can also affect how much your property is worth. For example, if there is a scarcity of employment or a slowdown in wage growth, then fewer people will be able to purchase properties in your neighborhood, expect the prices to fall.

It is imperative to be up to date with the current status of property sales and property price appreciation in your area. This will lead to you buying or selling a property in the best time.

7. Supply and Demand

In a given market, if demand exceeds supply, property prices are bound to increase. This scenario occurs when there is a higher amount of people in the market for a lesser number of properties. The competition to secure property drives prices upwards.

8. Investment Potential

The worth of a property is also influenced by the potential it presents to investors. The amount of rental income an investor can expect from a property. The prospective of the property price to increase in the future, as the investors will enjoy capital growth if they purchase and sell the property later. Accurate predictions can be made if you take into account the summarization of the points mentioned above in this article, especially the economic outlook of that particular area.

An essential suggestion for owners or future buyers of investment properties would be to get the best value landlord insurance; this will ensure the longevity and security of your property.

Wrapping Up

It is easier to avoid common property buying and selling mistakes when you are aware of the factors mentioned above. Being more knowledgeable regarding these pointers can help you accurately estimate the price of a property.

If you are planning to sell your property, consider these factors when pricing your property to help attract serious buyers. Or if you are planning to buy a property, the precise estimation will help you in paying the correct price and not an inflated one.

apartment building -DepositPhotos

Chris Freeman

Chris Freeman

Read Full Bio