What Affects Property Prices?
The first question everyone asks when they decide to sell a property is “How much is it worth?” This is a surprisingly difficult question to answer, because every property is different. What we can do, however, is look at the factors which affect house prices.
When push comes to shove, your home is worth what someone will pay for it. Valuers try to figure out that price by comparing the property to similar homes currently on the market, recent sales and their stock of experience over the years, balanced by the current market conditions.
There are three main methods valuers use to estimate a property’s market price: comparable sales, income and cost.
• Comparable sales method: the most common of the three methods, this one is also called “inferred analysis” because the valuer infers the price of your property based on current market sales of similar homes. Adjustments are made based on sale dates, the speed of the sales, relative property sizes and conditions, location and a variety of other factors. If the valuer is experienced and has good local knowledge, this method is very accurate. Most valuers mix in a bit of the income method as well, to give a better overview of the property’s value.
• Income method: an unusual method which looks at the future income potential of the property (from renting or reselling, for example) instead of an intrinsic market value. Valuers use this method when assessing a property that’s being bought as an investment rather than as a home, to give them an overview of how the investment will pan out.
• Cost method: most frequently used as part of a survey, this method looks at the building as a set of components and values it based on the cost of rebuilding and refitting from scratch. The valuer takes the market price of the land, adds the price of rebuilding everything on that land, then subtracts depreciation.
Whatever method the valuer uses, they will always take into account a wide range of factors. The biggest effects on your property’s price come from two things over which you have little, if any, control: “the market” and your location. However, a good valuer always takes your property’s individual characteristics into account, including:
• Age: older homes are generally worth less than new builds, though there are exceptions. Listed buildings and historical locations can add to a property’s price tag, provided the building is well-maintained.
• Size: a bigger property costs more money than a smaller one, assuming everything else is equal.
• Number of bedrooms: while the total number of rooms is important, almost everyone buys based on the number of bedrooms. More bedrooms means a higher price. A room must meet certain specifications to be considered a bedroom – you can’t just label your walk-in wardrobe as one and add a few grand to your property price!
• Room layout: a cramped, dingy home will almost always fetch a lower price than one with well-lit, airy spaces. Unusual building layouts can also be very hard to sell, especially if their oddities are inconvenient (e.g. if the kitchen is a long way away from the nearest room with enough space to eat).
• Structural integrity: vital in older properties, but important in any home. Structural defects can be extremely expensive to repair, not to mention dangerous for the home’s inhabitants, and they will be detected by a survey. Structurally sound properties sell much better and for more money.
• Wear and tear: even if the structure is sound, battered walls, worn floors and old windows will reduce the market price. The same goes for any fixtures and fittings included in the sale, such as built-in cupboards, carpets, boiler, water tank and so on.
• Garden: a garden, even if it’s concreted over, is a big asset for almost any property.
• Garage or parking space: a place to put the car – or multiple vehicles – is becoming increasingly rare, especially in larger towns and in cities. If you have a garage or an off-road parking space, your property’s value instantly increases. The same goes for dedicated on-road parking (though it’s less impressive).