Knowing the value of a property can be important in case one plans to buy a new one or sell an existing one. Knowing what factors can affect this value is very useful as it becomes relatively easy to predict the price or cost you would get for a property at a given time. You will be less prone to being fooled into a wrong deal. In this article, we will highlight 10 crucial factors to be aware of if you wish to estimate the value of the property being considered.
1) Economic Factors:
This is a macro-environment factor that affects the sale, purchase, and value of all goods and services. Specific to a country, the disposable income levels of its population, the unemployment rate in the country, the poverty index, the human development index, and the GDP, are some of the economic indicators that illustrate a country’s economic performance. Usually, the higher the economic performance the more income and optimism the people of the country have, this leads to people having a positive attitude towards spending and this drives up the demand for property, increasing the property value and prices.
2) Political Factors:
The political stability of a country determines the outlook of a lot of other factors, such as ease of doing business, economic certainty, ease of making choices, and ease of making investments. Generally, the stable the political scenario of a country, the better is the country’s economic landscape. This keeps the aggregate demand high, the economy keeps growing, and the value of the property and material wealth appreciate.
3) Supply and Demand:
The supply and demand of a particular size and kind of property would also determine its value. The greater the demand for a property, the higher the price/value. The relation of property value with supply is an inverse one, and the more of something is available, the less valuable it becomes.
The location where the property is located plays a big role in determining the value of the property. What is the location like? Is it in an upscale area? Is it located near schools and restaurants? What is the commercial value of the area? All such things play a part, proximity to other residential areas and office areas, and many other such location-dependent factors have a role to play.
5) The comp set:
This is usually a term used to describe comparable properties. In a particular area, check the prices and value of property similar to the one you want to find out more about. Then compare the prices based on the size, space, age, location, and amenities present among all these.
6) Home Size and usable Space:
The market value of the property is usually determined by the price per square foot of the property. This is calculated by dividing the price of the property by the area in square feet available. For example, a 1500$ square foot home, sold for 450,000$ would mean a price per square foot of 300$. Besides this figure, the value of the property also depends upon the usable space. This useable space refers to bathrooms, bedrooms, and kitchen space.
7) Age and Condition:
How old is the property? How many real estate repairs does it need? Usually, if the answers to these questions are relatively new, and not many repairs, the property has a high value.
Apart from age, the condition of the property matters. People would rather buy a 10-year-old well-maintained space, rather than a new space with the need for renovations
8) Interest rates:
Interest rates in a country can determine the value of properties to quite an extent. They determine the level of spending and the investor confidence in the area. The lower the interest rate, the lower the mortgage payments and interest payables to banks and lenders. This would also mean that investing is better than placing money in the bank for lower returns. In this case, the property will become more affordable for people wanting to take out mortgages.
9) Renovation potential:
Buyers are interested in a property that they can customize and renovate according to their will and choice. This would mean that if a property has more usable space and there is room for upgrading bathrooms, and design implementation, then the property is likely to have a higher value.
10) The ‘curb-appeal’ and upgrades:
If you have a property and you wish to improve upon its price and value, go for renovations and improvements in the ‘curb-appeal’ or outside look and feel of the house. Have it re-painted, have new bathrooms and bedrooms made, refurnish the floor, and bring in a new house plan and incorporate the use of design-thinking to come up with customizable or flexible designs.
As stated in the beginning, knowing the accurate value of a property is important if you wish to get a good deal. For this to happen one must understand the factors that determine the value of the properties. In this article, we have mentioned a few factors which affect the property value, but there are other factors out there too which need to be studied to fully grasp the technique to estimate property value.