Property value: 10 Factors that influence the price

Article summary

• Location is the most important factor affecting property value.
• The selling price of other properties in the area, and the price at which the property in question was previously sold for, affect value.
• Market forces, such as interest rates, impact the property market.
• The advice of estate agents is invaluable in determining a property’s estimated market value and its price tag.

Determining the value of a property can be a process that requires guidance. That’s why we provide an overview of factors that determine property value to help you make an informed decision.

We provide some insight into the property market and how it affects value.

Setting the value of your home is just the beginning of the negotiation process, but it helps to know a good starting point so you can attract offers.

10 factors in determining property value

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 but it’s true. Location is the biggest factor.

The value will be affected by:

• Nearby attractions in the area.
• Proximity to schools.
• Proximity to business centres.
• 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 profit from 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 property’s value will also be affected by how the space is distributed throughout the house ie. how much of the area is 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 repainting 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 home’s value 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 significantly impacts 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 or buyer’s market. A seller’s market means house prices are rising, while a buyer’s market means the opposite.
• As of 2024, South Africa is progressing towards a seller’s market, as the demand for properties outstrips the supply.

8. Interest rates

• The South African Reserve Bank sets the repo rate which in turn affects the interest rates at which banks will lend.
• As of November 2024, the repo rate is 7.75% making the prime interest rate 11.25%.
• There’s been a succession of interest rate hikes over the past few years, but in 2023 experts predicted this would come to a halt.
• The prediction was borne out when the interest rate was left untouched by the SARB in their September 2023 and early 2024 meetings.
• Interest rate hikes reduce the demand for houses which in turn leads property values to fall.
• Experts now predict that the interest rate will be cut in the coming months.

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

• Political uncertainty, such as an upcoming election, can affect the property market.
• Since the 2024 election has concluded and people are optimistic about the country’s future, demand for properties is likely to increase.
• Loadshedding is the current factor affecting property value in South Africa. Backup generators and alternative power sources can raise the value of a property.

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 value.
• 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.

Buying a property

If you intend to use the funds from your property sale to fund a new home purchase or are a first-time homebuyer; getting prequalified will help you determine what you can afford on a home loan, so you have a target in mind when looking to purchase a home.

You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator.