Factors driving down the price of your home
IF YOU know the value of your property, and understand the factors that affect that value, then you will know how to safeguard against negative influences that will cause your home to depreciate, says the regional director and chief executive of Re/max of Southern Africa, Adrian Goslett.
To help homeowners protect the resale value of their homes, he says, three key factors need to be considered – location, external market conditions and the condition of the home.
Echoing this, Erwin Rode, of Rode & Associates, says that for residential property, the most important drivers of value are location, floor-area size, quality or age of the building, finishes and condition of the building.
1. Location
The location of a property is the biggest determining factor of a home’s value. Each suburb has its own maximum and minimum values based on previous sales that will largely dictate the price parameters for future sales. But the parameters can change if demand for the area changes, Goslett says.
“The more desirable the location and the higher the demand for the area, the more expensive the homes in that area will become.
“The most desirable suburbs are typically located in the most convenient, trendy, beautiful, and/or secure parts of a country. Keep an eye out to see if anything in your suburb changes to make it more desirable.”
An example of a positive influence could be the opening of a trendy restaurant, while abandoned homes in the area could be a negative. Other negative
factors, says Rode, include noise – such as being on a busy road or under the flight path of an airport.
“Location would also include crime and proximity to work opportunities. In low-cost areas, one presumes proximity to reliable public transport is also a factor.”
In addition, says David Jacobs, the Gauteng regional sales manager for the Rawson Property Group, the neighbourhood makes a “huge difference” to the value and growth prospects of a property investment. Proximity to schools, amenities, public transport routes, hospitals, and police stations are also taken into consideration.
“This is usually incorporated when an agent does a comparative market analysis.”
2. External market conditions Property values are based on the rules of demand versus supply and will constantly change in response to external market factors, Goslett says. If demand is greater than supply in a given market, property prices will increase.
However, if there are more properties on the market than there are buyers, property prices will drop.
“When things like interest rates, inflation and unemployment are on the rise across the country, demand usually drops along with property prices.
Similarly, during periods of economic flourishing, demand usually rises along with property prices. While it is virtually impossible to time the market accurately, keeping abreast of the external market conditions can help you decide whether now is a good time to sell.”
3. Appearance and condition of the home
The features and condition of the home will also determine its value, he says. This includes things such as the state of the roof, the number of bathrooms and the size of the property. The visual state of the property will also influence the value of the home, as it can make the property more or less desirable to potential buyers.
“Homeowners should keep on top of home maintenance issues and keep the home modern and appealing to ensure that the resale value is not affected.”
When a property owner is ready to sell, Goslett says, hiring the right professional and following their advice should be the priority.
“Many might not realise that there is a difference between an official valuation certificate and a real estate agent’s market assessment value of a property.
“|The difference is that a property valuation can, technically, be conducted only by licensed appraisers.
“Some, but not all, real estate agents are licensed to provide an official valuation. But all licensed real estate professionals will have the requisite expertise and access to information to provide a fair market assessment of the home’s value.”
Other things that can drive down a property’s value, he says, include the quality of the property’s infrastructure – if it is old and unmaintained and needs a lot of work, or is situated in a notorious neighbourhood, an inconvenient location, a remote or crime-filled area or on a busy road with constant traffic noise.
“One thing modern buyers are unwilling to compromise on is security. If there is no basic security or the security system is not updated, then that can also contribute to lessening the property value.”
The factors that contribute the most to a property’s value though, says Kgomotso Sebakwane, the head of property analytics at FNB, is the amount of living space available.
“Different people value different things. However, having the option of having an extra bedroom will always add more value. Beyond just the purely functional aspects of a home, the quality of finishes adds extra appeal to a property.”
Any major structural or cosmetic defects, however, detract from the value of a property.
“Whether it’s a crack in the wall, rising damp or peeling paint, the potential home buyer lands up staring at a potential problem that they need to fix.
“Whatever the quoted cost of repair, the potential buyer will always subtract more from the value of a property, based on the uncertainty of even more repairs. People tend to double discount when they see anything wrong.”