Factors That Impact Your Property's Value

There are numerous factors to take into account when searching for a new property, whether you're an investor or a home buyer. Finding the best property to purchase is more difficult than simply choosing the most attractive home in your neighborhood. Numerous factors, including location, demographics, and school zones, influence a property's value. Here are the elements that have the power to raise or lower values.

The location is responsible for 80% of a property's capital growth. Suburbs vary greatly from one another.  People seem to love the idea that most necessities for a good life are just a 20-minute walk, bike ride, or ride on public transportation away in our new "Covid Normal" world.

Things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs. Now days, the ideal lifestyle is to be able to commute 20 minutes or less to work, live, and play.

Some suburbs will always be more popular than others, some areas will have more scarcity than others and over time some land will increase in value more than others. That’s why it’s important to buy your investment property in a suburb which is dominated by more homeowners, rather than a suburb where tenants predominate.

Some people are willing to pay a significant premium to be located within some well-rated primary and secondary school zones. Competition for places in preferred school zones has pushed property prices sky-high.

A suburb's population and demographics have a big impact on how much money a property is worth. Three- and four-bedroom homes, for instance, will cost more if you reside in a family-dominated suburb.

Your property's value may be positively impacted by its street appeal. t’s obvious that streets with grand views in posh neighborhoods produce a certain type of premium. A higher price is often paid for homes on streets with low noise, trees, and maintenance.

Popular streets are often quiet, away from busy roads, railway lines, flight paths and other negative features. Tidy, clean and well-maintained streets with good condition paths and roads make the street far more sought after. 

Location, amenities and the suburb obviously do some of the heavy lifting for a property value, but understandably the property itself makes up the rest.

One key indicator for market value is the price per square metre – the total sales price divided by the property’s area. So, obviously, the bigger the property, the more valuable the property is.

But wait, there’s more.

Not only does size determine a property’s value, but also how much of the space is usable space.

Equally, having a garage or a dedicated storage cage can also add a premium, particularly for smaller properties.

Additionally, features like garages, swimming pools, backyards, air conditioning, patios, and balconies all contribute to a property's value.

A property in good condition would be worth more than one of equal size that is in bad condition which requires extensive renovations or repairs. Additionally, buyers would often rather buy a newer house that is well maintained than an older one that needs major renovation.

Talking about renovation, while recently renovated properties will usually sell at a higher price, if there is scope for a buyer to improve a property, it could also increase its value.

This is especially the case for properties with a larger land size that would allow for additions like a new swimming pool, extension or deck.

Property construction and (sometimes) renovation or additions require building regulations and planning permission. Failure to adhere to these regulations could result in a property being demolished.

If regulations make it difficult to build in a particular area or, if for example, the property is in a heritage listed area that restriction new development, this can have an impact on the value of the property.

If a home can be renovated to add value and later sell, then that becomes attractive to a group of investors.  

Similarly, investors will be drawn to properties that are in an area tipped to gentrify or rise in value, as these will be popular among renters. 

The prevailing economic conditions including interest rates can play a big role in how much prospective buyers are willing to pay for a property.  That’s because every rate hike can equate to hundreds of dollars extra in monthly mortgage repayments, which means people may have tighter budgets when looking for a property to buy.

And this can put a downwards pressure on property values. And on the flipside, as we have seen over the past 2 years, dramatic interest rate cuts can entice borrowers to buy, creating a surge in demand and therefore pushing prices up.

When it comes to your property value, there are many factors which weigh into the final number. Understanding what affects the value of your investment property means you’re better placed to make the best financial decisions when it comes to renovation, improvements or even selling.