People need to know what the term property value really means because there are a number of factors that impact the value of a property. Picture: Freepik
Property has been touted as a good investment as it is a tangible asset that appreciates over time, according to Arnold Maritz, co-principal, Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay.
In order to capitalise on an investment, people need to understand the meaning of value in this context and be aware of the key factors that contribute to this value.
Maritz says that when real estate is discussed, the term property value is often tossed around but is true meaning is misunderstood.
“While many equate property value to the price someone is willing to pay, a deeper exploration reveals that it is influenced by multiple factors and methodologies,” Maritz said.
“From market trends to physical attributes, each element plays a pivotal role in determining the worth of a property.”
Maritz lists the main factors that determine property value.
Location is the most significant factor that can impact property value, according to Maritz, as it dictates the desirability of the property. It can influence everything from daily convenience to long-term investment potential.
Proximity to amenities such as schools, parks, public transport, and business hubs as well as factors like good views can elevate a property’s value. Neighbourhoods with lower crime rates and signs of economic growth are generally more sought after.
“However, it's essential to note that location’s impact is immutable; it cannot be changed, only leveraged,” Maritz said.
The size of the property, including the erf size and the usable space within the home, forms an important basis for valuation. Larger properties will generally command higher values, however the layout also matters significantly.
A home that is well-designed as well as makes efficient use of space and volume can enhance the value of the property.
Maritz says that properties that are well-maintained and free from major defects generally receive higher valuations.
Therefore regular maintenance is crucial to preserving the value of a property as neglecting small issues can easily lead to costly repairs and lower offers.
The age of the property also has an impact on value and while historical charm can add value, older properties may need more updates and repairs.
According to Maritz, market trends and comparable sales can offer insights into current property values based on empirical data.
The market approach involves comparing a property to similar properties that were recently sold properties in the area to estimate its value.
Economic conditions such as supply and demand influence these comparisons. High demand with limited supply generally pushes up property values, while an oversupply can lower prices.
Renovation and upgrades are a great way to improve the value of a property, however, all upgrades are equal so it’s important to do research.
“Every area has a ceiling price, which is the highest price the market is willing to pay and there is no point making improvements that will raise the sale price of your home beyond its market value,” Maritz said.
Simple improvements such as thorough cleaning, minor repairs and cosmetic upgrades like new taps or kitchen cabinet doors can make a property more attractive to buyers.
Larger renovations, like converting a garage to a granny flat can yield substantial returns if it is in line with buyer expectations and market conditions.
Therefore it best to consult a property professional who understands the local market to determine the best upgrades to make.
Here are some steps one can take to determine good value and minimise risk when buying a property:
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