Factors to Consider When Determining a Home’s Value

couple talking with real estate agent

Investors and homeowners who would like to sell or let their properties are always keeping watch on real estate values. Knowing how much a property is worth at a certain time is important for investors who would like to earn passive income from real estate. For homeowners, determining their property’s value helps in selling or letting purposes.

If you live in a prime location such as Stratford, London, and you’re interested in letting or selling your home, you can expect a huge demand from the market due to the place’s close proximity to shopping hubs, tourist spots, and business districts. However, the ideal location of your property makes it expensive, so you’ll most likely need a competent estate agent to help you with the process.

Macro and micro factors play in determining a property’s value. So whether you’re an investor, a seller, or a buyer, you need to understand what makes up a property’s value in order to know your way around the real estate market.

Macro Factors

1.) Demographics

This refers to the profile of a composition of a population, such as age, gender, race, income, migration patterns, and population growth. A major shift in the demographics of a nation can have lasting significant impacts on real estate values.

Baby boomers are an example of a demographic, and they’re currently the ones with the largest influence in the real estate market. Now that more baby boomers are nearing the age of retirement, this can have an impact on the demand for real properties such as holiday cottages and larger homes.

2.) Interest Rates

Real estate interest rates change frequently. Higher interest rates mean higher mortgage costs. When it’s lower, the cost of mortgages will also naturally decline, but the demand for homes will increase, consequently raising their prices.

3.) Economy

The rise and fall of GDP, employment rates, prices of goods, and other economic indicators also affect real estate prices. But the effects vary depending on the type of real property. For example, hotels can suffer because tourists may avoid a country with a sluggish economy, while office buildings will remain stable because tenants are under long-term contracts that aren’t amendable due to economic performances.

4.) Politics and Government Policies

Tax credits and other incentives from the government can help boost the demand for real estate temporarily, but this can pose false trends, so investors must be alert so as to not mistake an increasing demand being a result of other factors.

Micro Factors

1.) Location

Homes near schools, sporting venues, offices, shopping hubs, and other urban areas are more expensive. If there’s a Michelin-star restaurant in your vicinity, your property’s price can shoot up to 50% more than the regional average. Waterfront property values can also increase 10%-15% more if a fishing line is allowed to be cast. Properties in Stratford and other areas with an arena or racecourse nearby can also perform 10% better than those in districts without any sporting venue around.

2.) House Name and Number

City neighbourhood, suburb in the summer aerial

Interestingly, the name of the road the property stands on also has an impact on its price. The names “street”, “terraces”, and “courts” are found to have lower values than homes with “King” or “Queen” in their road names. Meanwhile, royal roads with the highest value have “Elizabeth” in their names.

You can give your house a name instead of a number if you wish to increase its value. Write to your local council first to ensure that your chosen name hasn’t been taken yet.

3.) Kerb Appeal

Properties in tree-lined roads can climb up to 15% more in value, while those surrounded by trees like Wisterias can have a 5% added value.

4.) Blue Plaque

Blue plaques add historical interest to a property, hence its value can increase up to 3% to 5% more.

5.) Energy Efficiency

A home with an “A” energy efficiency rating can have an increase in value by up to 14%.

Now that you know the factors that influence real estate values, you can determine if you would be getting your money’s worth if you invest. Always research and consult the experts before making a decision.

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