Do you know what your property is worth?
Category Expert Insight
While the value of your home is usually fairly fixed, what you can sell your property for will fluctuate with the market.
Current sales in the area and a combination of five factors usually come into play when determining the value of your property. Seeff gives some insight.
Factor 1 – Housing demand. Your property will be worth more if there is a shortage of properties on the market. Conversely, if there is an abundance of listings on the market, you can expect the value of your property to decline.
Factor 2 – Recent sales. Generally, a property is worth what a buyer is prepared to pay for it in the current market. Taking the most recent sales in the area, generally the last three months, is therefore ideal to arrive at a suitable price, but be sure to compare like with like.
Factor 3 – Location. A property's value is greatly influenced by its location. Generally, a house near schools and amenities, with easy access to public transport, or in a popular coastal area will be of a higher value, but the values of each suburb and area will differ.
Factor 4 - Property condition. The better the condition of the property, the more value will be added to your property. This includes the interior, exterior and quality of design and construction. Be careful not to overcapitalise with the view to achieving a higher price.
Factor 5 - Size and layout. The size, layout, features and finishes play a key role when it comes to determining its value. The age and design will also be considered. Generally new or renovated properties will be priced slightly higher.
Asking versus selling prices
There is often a difference between the asking and selling prices of properties. Asking prices tend to be pegged above the average selling prices as the seller will always look to secure the highest possible price. While such a strategy might yield results in a seller’s market, it becomes difficult in a buyer’s market. A 5% differential is usually standard. Anything above this may result in your property not attracting any offers.
What is equity and why is it important?
Equity is the portion of your property’s value which is not under mortgage. For example, if your property is worth R1,5 million in the current market and your mortgage loan balance is R900,000, then your equity is R600,000.
Equity in your property is an important concept which allows you to have a buffer to absorb financial difficulties and interest rate hikes. It also means that you will have some room to negotiate when selling the property.
Author: Gina Meintjes
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