How the economy and other factors impact the value of your property
Category Expert Insight
Your property purchase is the biggest financial investment of your life and you need to look after it and make good choices, says Samuel Seeff, chairman of the Seeff Property Group.
The idea is that you can take out a mortgage loan to help you pay for the purchase and as time goes by, the property accumulates in value. The longer you hold on to it, the more value it will accumulate and when you decide to resell it, you will hopefully be able to do so at a higher price compared to what you paid for it.
Aside from the passage of time, the state of the economy which influences supply and demand in the real estate market and in turn price growth and property values.
What role does the economy play?
The property market closely tracks the economy. During an economic boom when there are more buyers and sales activity, prices tend to rise rapidly. When the inverse takes place and the economy declines and there are fewer buyers and sales, price growth will decline.
While currently in a low-to-no growth economic phase due to the Covid Pandemic, Seeff says the low interest rate has in sense affected the natural supply and demand working as it is boosting demand in the market, hence we are seeing a level of price growth which is contrary to what would have resulted from the current economic climate.
Should the interest rate start climbing while the economy remains weak, buyer activity and sales will likely decline and price growth as a result.
Tiaan Pretorius, manager for Seeff Centurion adds that demand and supply is a big factor. In the popular price ranges for Centurion there is for example still healthy demand but with equal supply, price growth remains constrained. Where there are fewer competing properties, sellers would be able to get a slightly higher value for their property.
What other factors might affect values?
Pretorius says where the property is located is a prime influencer of the value. Aspects such as whether it is a middle or upper income area or an entry level complex or luxury lifestyle estate, whether it has views or is close to transport networks and these days, whether it has access to fibre, all factor into the value.
Schools and universities are a big priority and buyers will pay more for such a location, says Gerhard van der Linde, managing director for Seeff Pretoria East. Additionally, the size of the accommodation and land and style of the home play a role. It is for example easier to sell a three bedroomed than a two-bedroomed home, but anything above four bedrooms will not sell for a higher value.
The condition is also a factor, he says. Buyers pay more for a well-maintained and modern home because most do not want to have to do any work on it. Sellers should remember that their property competes with other similar properties and if it is in a worse condition, it will have lower appeal.
Levies can also be a dealbreaker. The levies in some complexes make it unaffordable for buyers and sellers then have to be more accommodating with their asking prices to compensate.
What might bring down a property’s value?
Neglect and poor maintenance and outdated finishes will most certainly impact the value. It will also be affected if the neighbourhood is poorly maintained or has a high crime rate. Security has become a top priority for buyers, says Van der Linde. If you live in a neighbourhood with community safety initiatives, consider joining because, aside from a proactive role in keeping your neighbourhood safe, it also ensures property values are not negatively affected by crime.
Author: Gina Meintjes
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