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10 Timeless Factors That Affect Property Price
Before going into factors that affect property price, it is of utmost importance to understand that property value and property price are 2 very different things. Property value concerns how much the property is worth in the market after assessment by valuers. Property price is the price that the property is transacted at between buyers and sellers. It is very common for properties to be transacted above or below property value. The most wide spread example can be found in the sale of a resale apartment. Resale apartments usually transact at valuation plus a cash-over-valuation (COV). A valuation could be $400k and COV $50k. In this instance the property value will be $400k and the property price will be $450k.
Saying this, it is also common for valuers to value private properties at transaction price. Different valuers can have differing opinions on how much a property is worth. Investors usually hop from valuer to valuer until they can find one that values their properties at what they think is right.
The key stumbling block for transactions to take place is a differing perception of what the property in question is worth to the buyer and seller. Buyers inevitably will always want to buy at the lowest price while sellers want to sell at the highest price. Having a valuation will give both parties an indication of the parameters to work within towards an agreed property price. Here is a quick run down of 10 proven factors that affect property price.
A property resides in a physical location. Some areas are simply worth more than other areas. You cannot expect to sell your apartment in a rural area at the same price as apartments in City Hall. You can price it that way, but whether anyone values your property as much to buy at your price is very unlikely.
One of the first things that potential property buyers check out when visiting a place is to take a look at the view. A property with great unblocked view will have a higher value than one with a blocked view. Nobody likes to look into neighbours’ kitchens every time they take a look out of their balcony. This is also a reason why condominiums with a sea view or lake view has a higher demand and usually fetch a better price than those without. If your property has a good view of fireworks every National Day or New Years Day, remember to tell a potential buyer that to increase the perceived value.
The level your apartment is at is related to the view. It is generally accepted that the higher floor an apartment is at, the price increases as well. There are instances when prices go down when level go up. Usually it concerns 4th floor or 14th floor as Chinese superstition associates the number 4 with bad luck. Practically, a higher floor will also be less noisy, more windy, better air, lesser insects, etc.
Take note that if the floor is just above a condensed tree, you could be in trouble. Although being above the trees may give you a better view, some clusters of trees are packed with birds and can make each evening a nightmare for you. If you are selling such a unit, don’t arrange buyer’s viewing during hours where you know the birds are most active.
Amenities & Accessibility
It goes without saying that property hunters are willing to pay premium price for location with great accessibility and amenities, The best example for this is the proximity to subway stations which is a big item in most buyer’s checklist. It does not seem to matter even if the subway station is at the extreme end of the transit line. As long as it is near a station, it is going to command a pretty good price. Closeness to shopping malls and supermarkets will also offer a great convenience to potential buyers which translates to higher perceived value.
What is situated around your neigbourhood can also have a great impact on price. Close proximity to a good school can be attractive to buyers willing to pay a high premium. Buyers may also be very willing to pay a premium price if there is a place of worship nearby that they frequent.
Not only does what is available in your neighbourhood now impact price. What is planned for the estate in the future will also play a role.
Recent transacted prices in the neighbourhood on comparable properties has long been used as a reference to what your property could be worth. If a similar apartment on the next block is sold for $1m, no one would fault you for pricing your apartment at $1m as well. Do remember that just because an opposite apartment sold at a good price does not mean that you should ask for the same price. The opposite apartment could have better facilities than yours or be a shoebox apartment. Or it could be freehold while your property is 999year leasehold. There are many factors at work and a lot of times the value that you think your property is worth is just your own perception.
One of the reasons why households are upgrading to private condominiums is the availability of facilities within the development. This means they no longer have to travel to the public swimming pools and gymnasiums, etc. Security and exclusivity are also factors why people are willing to pay more for added value. Properties with facilities are priced higher than those with less or no facilities.
Everyone would like to customize their own homes the way they want it. When the layout and shape of a property makes it difficult to customize for the buyer without extensive construction work, it could be difficult to sell at a high price. Buyers will inevitably take into account the costs involved in construction and renovation. The “morning” and “afternoon” sun is also becoming a common factor that buyers look for. This is something that requires a heavy load of works to change.
Physical state of the property
This relates to the layout of the property. When extensive work is required for roofing, sewage, flooring, etc, they buyer is looking at a hefty repair bill. This is a sign to a buyer to ask for a lower price and his perception of value decreases.
Plans for the estate
Even a first time home buyer now can recognize that what will be built around the surrounding estate will have a huge impact on the property price. Just that this impact is difficult to measure in numbers. You don’t have to go through a $5000 property workshop to learn that a property built beside a location where a future subway station is planned can fetch a good price. To learn more about master plans, check with the local authorities. If you are a real hardcore in property watching, sign up for the professional services that aggregate market data.