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Factors Affecting Property Values

Factors affecting property values

When buying property, it can be challenging to determine whether the asking price is fair, particularly if the property in question lacks obvious appeal. 

Ultimately, regardless of how a property is presented, its value will also be influenced by a variety of other factors. From the status of the economy to location, market sentiment and more, several things work together to add or detract value to a property. 

In this guide, we’ll take a closer look at these factors so you can make a more informed choice when buying property. 

Key Property Valuation Criteria

Whether you’re a real estate agent, vendor seeking to sell, seasoned investor or first-home buyer, understanding how value is attributed to a home can be key to making sound property purchasing decisions. 

The following are some of the key factors that you should be mindful of in terms of property values.

Location

Location is often considered the most important factor influencing property values. 

Factors that can significantly impact property prices include things such as:

  • Proximity to amenities (schools, shops, public transport)
  • Neighbourhood safety (street lights, crime rate) 
  • Views (ocean, valley, city)
  • Local infrastructure (roads, parks, public pools, sporting facilities)

For example, a property with uninterrupted ocean views, close to a capital city with low crime and great schools close by will typically have a very high value attached. 

Conversely, a property far from a major city, with few amenities or employment opportunities that is opposite an industrial area is likely to attract a far lower value. 

However, and perhaps confusingly, this is not always the case, as additional factors will also come into play. 

Economic Conditions

Economic factors such as employment rates, wage growth, inflation, and interest rates can influence property values. 

In areas with strong economic growth and employment opportunities, demand for property is typically higher, leading to increased prices. 

However, as we saw throughout the COVID-19 pandemic, remote working has made employment opportunities more accessible no matter your location. Meaning that regional centres are experiencing higher property values than ever before. 

Supply & Demand

The balance between supply and demand in the property market can affect prices. When demand exceeds supply, prices tend to rise, whereas an oversupply of properties can lead to price decreases.

In Australia, there is a recognised housing crisis in which the number of new homes being built is outstripping a booming population growth caused by both immigration and birth rates.

This means that when buying property in Australia currently, demand is far exceeding supply, pushing housing values up. Building a new home, rather than buying an existing one can help to mitigate this factor.    

Interest Rates

Changes in interest rates can impact property values by affecting mortgage affordability. Lower interest rates generally stimulate demand for property. This is because as borrowing costs decrease, buyers can afford to borrow and spend more, potentially leading to higher prices. 

While this is often the case and lower interest rates in recent years did support more buyers to enter the market and push up property values, it is not always a guarantee. 

This is evidenced in the rapid increase in interest rates in Australia in 2023, which did little to balance this or slow down rising property prices.  

Government Policies

Local and federal government policies and regulations, such as taxation policies, zoning laws, and planning regulations, can influence property values. 

For example, tax incentives such as reduced stamp duty and cash grants for first-home buyers or changes to property taxes can affect demand and prices.

Likewise, suppose an area is zoned for commercial use over residential use or permits redevelopment into high-density housing. In that case, it usually attracts a higher value than those that do not share those attributes. 

Demographics

Demographic trends, such as population growth, household income, household composition, and migration patterns, can impact property values. 

Changes in demographics can affect demand for certain types of properties and locations. For example, new migrants may concentrate on specific areas or neighbourhoods leading to increased demand for housing in those areas. 

Property Characteristics

Specific attributes of a property, such as its size, condition, age, layout and features can often influence its value. 

Appealing properties with desirable characteristics are typically more sought after and command higher prices. 

Once again, however, even the most run-down property that needs to be knocked down or extensively renovated can have a high value if its location, zoning and other factors are seen as desirable. 

Property characteristics

Market Sentiment

Market sentiment and consumer confidence will often affect property values. What this means is that when there are positive perceptions about the economy and its growth, more buyers may appear leading to increased demand and higher prices. 

Equally, negative sentiments can have the opposite effect whereby buyers become more cautious and less likely to invest, causing less competition and lowered property values. 

Global Factors

Global economic trends, geopolitical events, and international investor activity can also impact property values, particularly in major cities and global real estate markets.

Seasonal Trends

Ever heard people say that it’s best to sell a house during Spring? Seasonal factors, such as weather patterns and holidays (Christmas/Easter etc), can influence property market activity and prices. 

For example, there are statistically fewer sales during cold winter months in Australia when everyone seems to hibernate or over the Christmas break when everyone is in summer holiday mode. 

If you have a motivated seller, this could see you as a buyer facing less competition and therefore paying less than expected for a property. 

Generally, these periods are short-lived though, so property values will be less affected by this consideration than other factors listed above. 

Making Sense Of Property Values

As the above indicates, there are many factors at play when it comes to property values and ultimately, a property is worth what someone is willing to pay for it. 

This leads us to another factor that is less spoken about is also occurring – panic buying. 

Due to an increasing fear of needing to buy now or missing out altogether, many buyers are panic buying and spending much more than a property would normally be valued at based on standard valuation criteria. 

This can make it more challenging to determine the true value of a property or what is a reasonable amount to spend as a buyer. Thereby adding further difficulties to those hoping to buy a home. 

How Building Over Buying Can Offer Better Value 

If the above has you feeling a little lost about how to navigate the property market and hopefully become a homeowner, you’re not alone. 

Buying an established property in Australia has never been more complex and feels increasingly out of reach for many Australians, especially those who are renting and buying for the first time. 

At Stop Renting Perth, we can help.

Stop Renting Perth can help

Offering competitively priced house and land packages in locations all over Perth, we make it easier to escape the cycle of renting and enter the property market sooner. 

Avoid paying an inflated value for an outdated home that doesn’t meet your needs and instead build a brand-new home – choosing from one of 70 home designs that can be customised to your preferences. 

We support you to take advantage of all available government grants and schemes to offset your costs, with many of our customers also qualifying without the need for a deposit or significant savings. 

Owning your own home, that represents genuine long-term value, is possible with Stop Renting Perth. Book your obligation-free information session to learn more about what we do and how we can help you on your home ownership journey. 

See If You Qualify

We’re here to help, so let’s get started! it’s time to stop renting and start taking steps towards home ownership.