facebook Understanding Property Valuation: Factors That Influence the Market Price

info@investmango.com

11th Floor, Plot no 6, Magnus Tower, Sector 73, Noida, Uttar Pradesh 201307 UPRERAAGT12212

Our Blog

Home / Our Blog

Understanding Property Valuation: Factors That Influence the Market Price

Date - 27 Sept, 2024
understanding-property-valuation-factors-that-influence-the-market-price

Real estate encompasses a significant portion of people’s Wealth, however, real estate investments aren’t as simple as they seem because you need to understand the property valuation and the factors that affect it. Understanding property valuation is important as it tells you whether the property's price is worth it.

Hence, property valuations guide critical decisions in the real estate journey, and accurate property valuation is important for buyers and sellers both. For sellers, a proper property valuation is important as a proper property valuation guides the property sellers in setting a competitive and realistic selling price for their property.

However, for buyers, understanding property valuation helps them make informed purchasing decisions by securing financing and negotiating effectively. Property valuation isn’t as easy as it may seem but it encompasses numerous factors that play their distinct role in the final valuation of a property.

The factors that influence the property’s value encompass some evident factors such as the property’s location and size. However, property valuation also encompasses some more nuanced aspects such as market trends and local economic conditions. Let’s understand the factors that influence the property’s value.

1. Location:

The location of a property is undeniably the most influential factor in determining the value of a property. However, when we talk about the location, we don’t just talk about the geography but also the characteristics and potential of the area where the property is situated.

  • The proximity of a property to the essential amenities influences the property's valuation. This means that properties located near supermarkets, healthcare facilities, restaurants, and parks are generally more desirable.
  • Similarly, the availability of quality educational institutions near the property is also a crucial factor for families. This makes the properties near reputed schools highly sought after.
  • Moreover, efficient transportation links including access to major highways, airports, and public transit stations again add considerable value to the property’s price.

These factors make a location more appealing to a broader range of potential buyers, investors, or renters.

In addition to the above-mentioned factors, the areas known for their safety, community engagement, and low crime rates generally have higher property prices.

Also, the neighborhoods that are experiencing economic growth and development have more potential for value appreciation.

2. Size and Layout of the Property:

Although the overall square footage is the fundamental baseline for deciding the property value but a property’s layout also significantly enhances or reduces its overall value i.e. it is important to consider how the space is arranged and utilized.

In general, larger properties that have more usable space are valued higher and this includes the count of rooms because the count of rooms is the key indicator used by the buyers to assess the suitability for their needs.

However, as we mentioned above, size is not the only consideration but the design and layout of the property also play a crucial role in deciding the overall value of a property. Hence, a well-thought-out layout can significantly elevate the appeal of a property. For example, the layouts that provide a good balance between the private and communal areas along with the adequate storage space and natural light automatically enhance the living experience and eventually the property’s value as well.

3. Condition of the Property:

The condition of property again plays a crucial role in deciding the appropriate value of the property. It means, a well-maintained property without any defects or repair needs has higher valuation than the one requires repairing to be done. However, if the seller of the property has regular maintenance in place, then he/she can preserve the condition of the property and obviously the value of the property as well.

Do you know, that prospective buyers or investors generally factor the deteriorated condition of a property in the cost, effort, and inconvenience that they require to address these repairs and this typically leads to lower offers?

On the contrary, the property that is well-maintained and doesn’t have major defects is more attractive to the buyers which results in a quicker sale and also at a higher price.

4. Market Demand and Trends

Market demand is driven by the balance between supply and demand. High demand in comparison of the limited supply leads to increased property values. On the contrary, in those markets where supply exceeds the demand, property values may even decline. However, market trends are influenced by a range of factors, including –

  • Economic Conditions
  • Demographic Shifts
  • Consumer Confidence
  • Government Policies

Moreover, the areas experiencing population growth witness increased demand for residential units. This growth in the population in a particular area can be due to various factors such as attractive living conditions or migration for better job opportunities. This increase in the population in a particular area generally leads to a rise in property values due to the heightened demand for housing.

Conclusion -

Knowing how real estate property valuation takes place is necessary for making strategic decisions that align with your real estate goals and financial plans. However, the things we mentioned above are the most important things that you should be aware of while buying a property or deciding whether a property’s value is worth it or not. Read our other blog to learn about Current Real Estate Market Trends in Delhi NCR