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10 key factors that influence your property valuation

Whether you're a buyer or a seller, knowing the value of a property is an essential step in the negotiation process. Here's a guide to property valuation.

Property Valuation

Article summary

  • The main factors that determine the value of a property are the selling price of other properties in the area, and the price at which the property in question was previously sold for.
  • The advice of estate agents is invaluable in determining a property’s estimated market value and its price tag.
  • Market forces play a substantial role in determining property value and the final selling price; for example, a buyers’ market may force you to sell a property below the estimated market value.

Whether you are looking to buy or sell, knowing the value of a property is an essential step in the negotiation process. As such, it helps to know what factors play a role in property valuation.

There is a process involved, and being knowledgeable of it means you don’t have to “guess” the value of the property based on superficial elements

Property valuation: 10 key factors

The primary factors that professionals use to value a home include:

  1. The location.
  2. The age of the house.
  3. The size of the house.
  4. The condition of the house.
  5. Renovations.
  6. Renovation potential.
  7. The state of the market.
  8. Interest rates.
  9. Sales trends.
  10. The political situation.

1. Location

It’s a cliche (if I had a penny for every time someone said  “location location location”…) but it’s true. Location is the biggest factor.

Experts will look at

  • Nearby attractions in the area.
  • Proximity to schools.
  • Proximity to business centers.
  • The price of other properties in the area.

2. The age of the home

Newer homes are less likely to have maintenance issues and will be more tech-friendly.

That’s not to say there’s no benefit in buying older homes. Many property investors make a profit off house-flipping, which means buying an older home and fixing it up.

3. The size of the home

The size is measured in square meters, but the experts evaluating the home will also take into account how the space is distributed throughout the house ie. how much of the area is actually liveable.

4. The condition of the home

This includes factors such as:

  • The state of the finishes.
  • Cracks in the wall.
  • Flooring and furnishings.
  • The condition of the garden.

This is why small touches such as a repaint here and there or trimming the garden can help raise the value of the home.

5. Renovations

This is the benefit of focusing on renovations that boost the value of the home.

Bathroom renovations are the most cost-effective, raising the value of the home for relatively little investment.

Kitchen renovations are more expensive but the most effective at boosting the value of a home. Kitchens are the heart of modern homes and the state of one is going to have a significant effect on the home’s appeal.

6. Renovation potential

The surroundings may determine how much freedom new homeowners have to renovate their homes. For example, how close is it to other buildings? Is adding new stories going to block the view of other buildings around?

7. State of the market

For example, whether it’s a seller’s market or a buyer’s market. A seller’s market means house prices are rising, while a buyer’s market means the opposite.

As of 2023, South Africa is a buyer’s market as house prices are likely to grow less than inflation due to electricity and water shortages, and a stagnant economy.

8. Interest rates

The South African Reserve Bank sets the repo rate which in turn affects the interest rates at which banks will lend.

South Africa has seen a succession of interest rate hikes in recent times as the SARB attempts to combat inflation. Interest rate hikes reduce the demand for houses which in turn leads property values to fall.

However, experts predict that the interest rate hikes may come to an end soon as the SARB may be satisfied with the level of adjustment.

9. Sales trends

The price at which other properties in the area have been sold can push the value of a property up or down.

10. The political situation

Factors such as political uncertainty, which is usually the case when an election is coming up and the issue of land reform crops up again, have an impact on property prices.

Why you should hire an estate agent

It’s always best to go to a professional. Estate agents can provide a CMA (Comparative Market Analysis) which will take into account market forces along with the value and selling price of other properties in the area.

Estate agents have an understanding of the property market and the factors that play a role in property valuation. As well as providing an estimated property value, they can advise property sellers on whether they should attempt to sell above or below market value, and by what margin.

The negotiation game

The current buyer’s market provides the perfect opportunity to secure homes at below-market value.

If you’re looking to purchase a property, ooba Home Loans, South Africa’s leading home loan comparison service, offers a range of tools that can make the homebuying process easier.

Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

Get pre-approved for a home loan in just 2 minutes

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