What are the factors affecting property prices?
Sellers want to sell at a very high price where buyers want to buy at a very low price. Both sides are at times unreasonable and realistic. What occurs is both parties come to compromise and negotiate to set an acceptable price. Thus we should know what affect the price and so that you can present a suitable range to as an informed seller or an prudent buyer. Here are some most important factors.
1. Global or local market trends
Remember the Asia financial crisis in 1997, dot com bubble in 2000, SARS in 2003, and Lehman Brother crisis in 2008? During those periods, property prices were badly affected as many owners were affected by the bad economy. Some people lost jobs, their business and had to sell their properties quickly and quite often at loss. During those period of time, owners and buyers tend to be more realistic about property prices or may not even transact at all, maintaining a wait and see attitude. However, when the economy does well, transaction volumes usually increases and you will hear many properties be sold or bought at never before prices. So it’s important to keep yourself up to date on the current affairs and decipher how it will affect the current prices and get advise accordingly.
Real estate market has its cycles corresponding to the development of economy.
2. Legislation and policies
As part of the government’s way of protecting economy, many measures have been implemented throughout the years. Some were meant to boost our economy, draw an influx of foreigners, attract foreign investments, etc. these measures usually result in an increased demand for local property and thus, driving up prices.
However, the reverse is also the same. Cooling measures from the government is meant to prevent an overheating of local property prices and avoid an economy meltdown. It is also meant to protect the citizens so that they can still afford t have a roof over their head. Without such measures and restrictions, Singaporeans will be priced out of their house.
Again, it is a case of demand and supply. Certain areas (orchard road, Tanjong Pagar, Bukit Timah) are more sought after as compared to others. It is generally perceived that properties which are central and near to the city would fetch a higher price as compared to areas further away.
The environment factor refers to the physical and socio-economic environment. In the US, we have a Beverly Hills, Rodeo Drive, Hollywood Boulevard. These areas are generally priced much higher as compared to other parts of the country. In Singapore, it is the same. Certain prestigious or exclusive areas will fetch a higher premium as compared to others. Neighborhoods differ very much and change over time resulting in changes in property values.
However, certain not so desirable areas will also pull down the prices of property. Bearing near to hospital, cemetery or having nuisance in the neighborhood may bring down price of property.
5. Accessibility and convenience
The accessibility factors are those sites qualities which relate to proximity of supporters. It is measured in terms of the ease and convenience of getting to and from desired facilities. A location with the following ease of access and conveniences will usually fetch a higher price.
1) MRT station and/or bus routes, Expressways exits/entrances
2) Schools, university, market, essential services
3) Future developments within proximity of property can also affect the value of the property, e.g. new MRT, Shopping malls.
6. Size, shape and frontage
Size is measured by the width and depth if the lot and shape affects the value differently. Frontage of a lot refers to the length or one more boundaries that abut an access road.
Properties with large size and or wider frontage will fetch a higher price too. Combined with good design would be a great plus, such squarish or rectangular units. It’s difficult to design and optimize in the irregular space.
7. Height and view
The height of a property is more important for a high-rise development such as condominium rather than landed properties. People will pay higher price for a better view that is unblocked. Thus, in condominiums, apartments and HDBs, high floors will result higher prices.
8. Condition of property
The age of a building may be important factor affecting value when buying a new building compared to an old building. In general, the condition of the building and its state of repairs can have an effect on the value of the property. Therefore, is the property new or old? Can the condition of the property be improved with slight renovation? These entire questions will also affect the price of the property.
Private properties such as condominium offer exclusivity and unique features and facilities such as swimming pool, gyms, function room, courts, sheltered carpark, bowling alley, and so on. That’s why condominiums are highly sought after than the public residential HDB flats when you can afford the higher price.
10. Corner influence
The influence of a corner location on the value of a site depends on the proposed development on the side. Residential property- corner lots can be more valuable as they have more openings that allow more light and air to enter, and also more prominence that lots in the interior. However, they will have lesser privacy if they are located at road junctions with increased vehicular and pedestrian traffic. Hence, more noise and air pollution.
11. Design and architecture
The design and architecture including the layout of a property may have an important impact on its value. A property with an iconic design is an attraction to buyers.
12. Geological factors
Sites tend to have a lower value if they are costly to develop because of difficult geological factors. Subsoil affects the costs of preparing a site for building and can also influence the design of the structure that can be erected on the site.
Orientation refers to the facing or direction which the property is constructed. An orientation towards the west fetches a lower price due to the sun set, compared to property facing the sea or landscape park.
Tenure refers to the mode of holding or occupying land, whether is freehold or leasehold. For freehold estate, the owner holds land forever, subject to State’s rights. The owner of leasehold estate however has definite and limited duration and come to an end at specified date. If it is a leasehold property, the number of years unexpired will affect its value.
15. Build up area and number of bedrooms
The build-up area refers to the floor area of the building. A building with a larger floor area is likely to be more valuable than one with one with a smaller size although the different uses of the floor space can also influence value.
The market sentiment with expectation from seller and buyer also influence the transaction price of property.
To sum up, those are the major factors that influence the property prices. Keep those factors in mind when you go and negotiate the best purchase price for your choice property.