• The main factors in determining 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 what its price tag should be.
• 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 at below the estimated market value.

Whether you are looking to buy or sell, knowing the value of a property is an important 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

The factors that play a role in property valuation

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

1. The neighborhood

Location is the biggest factor in determining property prices, with the views, nearby attractions and the relative safety of the area all playing a role.

Experts will look at the price at which other similar-sized homes in the neighbourhood have been sold for, (as well as the price at which the property in question was last sold for).

2. The state of the market

Determining the market value of the home is just one step in the negotiation. If you’re the seller, you should not assume that the property price will end up being the same as your perceived selling value. Different factors can play a role.

For example, whether we’re in a sellers’ market or a buyers’ market. South Africa is currently experiencing a buyers’ market, due to the record low interest rates. However, that won’t last forever, as the South African Reserve Bank may be pondering interest rate hikes in late 2022.

3. The condition of the home

This includes factors such as the age of the home, the state of the garden (if one exists), and aesthetic elements such as flooring, furnishings, kitchen design, and so on.

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

For home buyers, the market value makes a useful guideline for negotiating your offer to purchase. You don’t want your offer to be too far below market value, but an estate agent can advise you on your chances of securing a bargain deal.

The current buyer’s market provides the perfect opportunity to secure homes at below market value. If you’re looking to purchase a property, Bond King Home Loans, South Africa’s leading home loan comparison service, offers a range of tools that can make the home buying 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.