Property values can be a contentious issue, particularly for homeowners who may have different perceptions to real estate professionals or even buyers.
Sometimes this difference is due to the emotional connections they have to their homes, and other times it is a misunderstanding as to what factors actually dictate a property’s value.
Property trends and “fashions” also have a strong impact on what makes one property more valuable than another, so value – and selling price – can be dependent on the times.
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This means factors of supply and demand are probably the most accurate gauge to determine a property’s worth. But property professionals note that not even this is 100% reliable as buyers themselves will place different values on different property elements.
A property’s location and features have a “big influence” on its value, says Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa. The main principal that contributes to growth in property prices is, like all fields of trade, supply and demand.
“The higher the demand, the more the seller can charge. When a country’s economy has hit a dip, this will have a knock-on effect on consumers’ buying power, which means the demand for property will drop and sellers will have to reduce their prices in order to sell.”
Each suburb, however, has its own target market and price range, and this dictates the upper and lower limits of property values there, says Tony Clarke, managing director of the Rawson Property Group. But even within this price band, there are often certain roads or blocks that achieve higher-than-average prices.
“Typically, these pockets of more expensive properties will be positioned in the most convenient, picturesque or sought-after parts of the neighbourhood. They may have better views, better orientation, or better security than those nearby, and because they attract a more affluent buyer, they are often more modern and well-maintained.”
When determining value, a professional evaluator will look at both a home’s features as well as its condition. They will also compare the property to other prices in the area before coming to a decision.
At the end of the day though, the selling price comes down to what features the buyer is looking for and what they are prepared to pay. For example, a swimming pool may be a negative for a busy professional but a huge magnet for a family with children.
Buyers will therefore pay for what emotionally excites them and this could, in most cases, be the wrong approach to determining the value of a home. What is horrid to one potential buyer may be acceptable or even pleasing to another, says Rode and Associates’ Erwin Rode.
He adds: “Fashions come and go, and this also applies to the layout and finishes of a property.”
Sea views, a waterfront location, proximity to schools and amenities, and ease of access to work and business are positive location aspects that add to a property’s value. Increasingly, people want to live close to work and enjoy lifestyle benefits during their free time, says Samuel Seeff, chairman of the Seeff Property Group. Some suburbs also have the X factor and a better reputation so they attract higher prices.
“You can find instances where similar homes just streets apart can differ substantially in value, simply because they are in different suburbs. For this reason some properties will sell only in certain upper-end price bands in particular neighbourhoods.”
Seeff says the more people want to live in a suburb or area, the higher the demand. If the demand exceeds supply, prices will generally increase.
Other contributors to a property’s value are accessibility to major freeways, being in areas where rush-hour peak commutes can be avoided, and being near to good schools. And as everything is about the rising cost of living and how people can save time and money, this means low-maintenance homes with semi self-reliant energy and water resources tend to offer better value. When it comes to security, the more bells and whistles a home has, the better.
The appeal of a home and what people are willing to pay for it is largely dependent on perception, Goslett says. This even extends to street names.
“Streets and roads sound pretty ordinary, but avenues, drives and hills sound a little more high-brow. Likewise, properties with a name rather than just a number tend to be viewed as special, and achieve better prices when marketed as such.”
Homes within an easy stroll of shops, restaurants, parks and public gardens are sought-after and valued, while the more self-sufficient your neighbourhood, the more people are willing to pay to live in it. Having a tech-friendly home is becoming more important so properties with features such as built-in charger points and thoughtful power outlet positioning can increase the desirability, and price, of a home.
Other features that can add to a home’s desirability include:
- Home automation tools, particularly for security systems
- Eco-friendly value-adds like solar heating or power generation and grey-water recycling systems
- Granny flats to accommodate family members
- Office space