When a situation arises, such as high supply and low demand, property prices get lower, and vice versa. But, it is actually quite more complicated than that, with many factors playing a part in affecting the value of a house! We cover 10 of the commonly heard of reasons right here.
Have you ever looked at a property for sale in Pakistan and wondered about the price? Property value is not always obvious when you are viewing from the outside.
The backdrop to any market value: the constant question of supply and demand! The higher the demand and the shorter the supply, the greater the price a property will have. Well, in times of high supply and low demand, property values are expected to fall. But it is all a little more complicated on the ground.
Here is a simple, step-by-step guide to the more common factors which impact the value of a property:
The bigger the property, the more it is expected to cost. Clearly, this is impacted by other factors noted below, but it is an obvious and yet essential starting point of any discussion about cost. However, we often use price per square foot to explore expenses in the real estate sector. As you might anticipate, many areas experience different trends in price per square foot of the property.
A well-maintained house requires a premium over one which is in a position of disrepair. That involves factors such as land movement or structural faults, as well as poorly maintained interior features like moldy walls or broken taps. This is a factor with a particular impact in the secondary market, as recently developed properties are less likely to show signs of damage or overuse.
3) Time on Lease
Secondary markets might see property value impacted by the time on lease in particular circumstances of a leasehold property. Market analysis shows that a leasehold property will undergo property price stagnation or decline beyond 20-35 years of its original lease period.
Some developers have more reliable reputations than others. Just like maintenance can affect property valuation, the expectation of quality produced by some developers can provide the reliability that commands a premium. Though, if a developer has a bad reputation, it is likely to negatively impact the price at which they can sell their properties.
Privacy commands a premium, for apparent reasons. A residential unit with precisely the same specifications is possible to enjoy a higher value if it profits from improved privacy or enhanced low-density living. Upmarket developments usually leverage this factor to provide a variety of exclusive properties within low-density living conditions.
The neighborhood in which the location of a property is one of the essential factors for property valuation. An area with low crime rates and a reputation for a safe, secure community is going to provide a significant boost to property prices over a high-crime neighborhood with a poor reputation. Moreover, factors such as integrated townships and eco-design with engaging outdoor spaces are another example of this positive impact of community on house value. It is easy to think of the kind of neighborhoods and townships designed to benefit from this favorable neighborhood feel.
7) Public Transport
Public transport links can provide an essential boost to property prices, particularly links to major routes like Metro bus or orange train. Close proximity to public transport hubs offers a substantial premium for property prices, as well as making them considerably more resilient to pricing downtrends. That means if you are fortunate enough to own a property near a newly announced Metro bus line, there is a good chance you are set to enjoy a massive house price windfall.
8) Educational Institutions
Prominent local schools can provide some outstanding impacts on property prices. Though, properties found within convenient traveling distance of public schools with great records benefit from increased demand and consequently increased valuations. Proximity to respected international or private schools can give a similar benefit, particularly in crucial areas that target affluent ex-pat populations.
On the other hand, while student-focused areas are not always engaging for homeowners, they are an excellent investment opportunity for some buyers. Although educational hubs with significant universities can provide a precious opportunity for buy-to-let investment in an area with strong rental potential, possibly pushing up valuations in critical locations.
People love to shop, which makes retail hubs a real benefit for house prices. Good access to large malls or hypermarkets can make a property more attractive to potential customers, and thus undoubtedly impact the value of a property.
Local amenities go far beyond public transport or the nearest mall. They include other essential elements such as sports centers, local parks, restaurants, and just about any desirable local amenity you may imagine. They all add to popularity with homebuyers, which adds to property value.
10) Economic Conditions
Property valuations are affected by far more than just the facts on the ground. It is essential not to overlook broader economic conditions when it comes to an understanding of the value of a property. A poorly performing economy or economic uncertainty decreases demand in the property market, which results in reduced house prices.
Interest rates are another piece of this economic puzzle. High-interest rates make house loan repayments less affordable for borrowers. That means the more significant the interest rate, the less demand there is for the property, which can lead towards decreasing prices. Lower interest rates mean more affordable lending, which in turn can result in rising demand and house prices.