The New York rocks are fragments of Pangaea, which formed when the ancient supercontinent split. It is these fragments of very hard rock which provide the perfect foundations for New York’s highest buildings. Where Manhattan schist can be found very close to the surface you can build high, and so Downtown and Midtown have become home to Manhattan’s tallest buildings. The hidden rock adds value to that land.
Your property won’t have Manhattan schist but it does have lots of factors which determine its value – some obvious and maybe some hidden. Consider these three aspects which influence its value.
You have heard it many times, in fact it is usually repeated three times.
But what does location actually mean? Consider the following list.
City – the values in one city compared to another will vary because of population pressures, employment and climate. We have all watched Perth’s prices go up and down because of mining for example.
Suburb – the value in one suburb compared to another will be based on distance from major amenities like the CBD, schools, shopping and transport. History will also play a part as if it started as a working class suburb this might be reflected in the size of the land, the types of property and the construction materials.
Areas within a suburb – not all parts of the suburb will be considered equal. Main roads have a negative influence on value as do noisy neighbours like light industry. Having a school reasonably close is good, right next door not quite so good.
Actual street – being on a quiet, tree-lined street with well maintained, attractive homes is good, having an attractive home on a street of run-down neglected homes lowers the value. The higher side of the road is worth more than the lower.
Do you have any hidden factors about your location which may add value to your property?
2. The Land
This is actually the critical component of the total property value. In the vast majority of cases the land is the part that increases in value whilst the building part, known as the improvement, actually decreases in value with a few exceptions. The exceptions are period properties which increase in value because of scarcity factor. It is worth noting that many overly enthusiastic renovators have updated period properties in such a way that all the period features were removed. If this occurs then the property will not increase in value as much as one with period features intact.
So understanding the going rate per square metre/foot is critical. A property large enough for more than one dwelling has an additional boost in value.
As there is less land as part of the property with townhouses and apartments they will not increase in value as much as stand alone houses over time.
Do you have any hidden factors about your land which may add value to your property? It could be a view or …
3. The Improvement
That means everything constructed on the land. In the contract of sale for a house the size of the house, garage and other buildings are not mentioned on the contract just the land details.
The construction materials make a difference. Brick construction tends to have more value than timber. Other important factors are the roof material, the amount of sleeping accommodation, bathrooms and toilets and living areas. A garage adds value, a carport not as much.
Many people think their new wool carpets and things like that add value. Not really. Recent decoration and new fixtures may help sell a property faster but won’t necessarily add much to the total value. What is generally called street appeal also helps. Is the property right on the footpath or is set back? Is it landscaped?
Do you have any hidden factors about your improvement which may add value to your property?
The Total Value
So how do you determine the value? It is not like another retail product which has a set price. A property’s value is determined by comparison with comparable properties. What are they selling for in the current market? If you watch the media this can move from one week to the next. However, there are some free tools available to you to get a fairly good idea.
The key here is comparable. You need to find properties for sale or recently sold which are like yours in all the 3 areas above. You just can’t say a three bedroom house anywhere in Melbourne is worth $x. You need the same suburb or very similar, same area within the suburb, same type of street and same size property. Tricky yes, but many websites help you. Here are a couple to get you going.
When you think you have come up with a value you can always ask a couple real estate agents to give you an idea of what your property might sell for on the current market. If their answer is much different than what you calculated ask why.