Knowing property value isn’t just for real estate pros – it’s key for:
- Buyers: To determine what you can afford
- Investors: To gauge how profitable an asset it’ll be
- Sellers: So they can price their property right and get a good deal/quick sale
It affects everything from how much you can borrow on a mortgage to what returns you’ll get on an investment. So, whether you’re jumping into the market or just watching trends, knowing what has an impact on property value is going to save you a lot of time and money.
1. What Determines Property Value?
Property value is driven by a handful of factors, all of them playing a big role in how a home is priced. If you can learn about these, you can figure out whether a property is worth it or if it’ll appreciate over time.
Location
Homes in top neighbourhoods – close to schools, shops, public transport, etc. – always command higher prices than their less attractive counterparts. It doesn’t matter if it’s a mansion; if it’s in a crime-ridden, run-down area, then it’ll still be less valuable than a modest home in a city centre or along the coast (which has much higher demand).
Property Size
The bigger the property, the higher its value – especially in major cities where space is less available. More square footage, whether it’s in the house or the back garden, generally means more money. Any homes with expansions or outdoor spaces, like a patio, also tend to fetch more on the market.
Condition and Age
How well-kept your property is can swing its value heavily since well-maintained or recently renovated homes always go for higher prices (while ones that need a heap of repairs might drop in value). Age matters here, too – older homes usually need more maintenance, but historic homes in prime locations can still be highly valuable if they’re in good shape.
Amenities
Modern features can easily bump up a property’s value, too, such as:
- High-end kitchens
- Energy-efficient appliances
- Smart home technology
- Gyms
- Pools
- Security services
Market Demand
The real estate market’s ups and downs directly impact property values – when more buyers are available than homes (a seller’s market), prices rise, and when there are fewer buyers and plenty of homes on the market (a buyer’s market, prices fall.
2. How Property Value Impacts Mortgages
Property value isn’t solely about buying and selling – it directly impacts the kind of mortgage you can get and how much you’ll pay over time. Lenders look closely at the value of the property to decide your:
- Loan amount
- Interest rates
- Eligibility
Loan-to-Value
The LTV ratio is something you’ll see lenders refer to a lot, meaning the percentage of the loan versus the property’s value. Lower LTV means less risk for the lender since they’re financing a smaller portion of the purchase, which gives you better loan terms and interest rates. High LTV ratios usually make it harder for you to secure a loan or at least force you to pay higher interest rates.
Impact on Interest Rates
You’ve generally got a better chance of scoring low interest rates the higher the property value is compared to the loan you’re asking for. Lenders see it as less risky. If the loan amount is high compared to the property’s value, however, you will likely face steeper rates.
3. International Property Valuation Differences
Property values vary from city to city, country to country, so let’s see how real estate is valued in different countries and what drives prices in those markets:
UK
London and its surrounding areas generally lead the market in the UK, with homes here fetching some of the highest prices in all of Europe, but there’s still a noticeable North-South divide – properties in northern cities tend to be far more affordable. Good transport links and proximity to schools or workplaces only further drive prices, even with remote work making outer-city living more popular.
US
The US property market is all about location, too, but the variation between states is quite significant. Coastal cities – from New York to Los Angeles – usually command premium prices, while Midwestern or rural areas are more affordable. A few other factors play into the price differences here, too:
- State and local taxes
- School quality
- Job markets
Booming tech hubs like Austin and Seattle have seen steep price increases, too, due to the demand and money in that industry.
Australia
Cities like Sydney and Melbourne lead the charge in Australia, whether it’s down to economic opportunities or the coastal lifestyle. Regional areas are always going to be more affordable than major cities with limited construction, but even these (like Southern Highlands in New South Wales) are seeing growing interest.
New Zealand
Auckland’s property market is hot, as always, and high demand is constantly pushing prices up. Key factors that influence property values in New Zealand tend to be:
- Migration
- Local job markets
- Tourism
- Growth potential
Spain & Portugal
Coastal areas and tourist destinations like Costa del Sol and Algarve are always big with international buyers and investors – you typically see lots of expats and second-home buyers here, making them some of the priciest markets. Cities like Barcelona and Lisbon are constantly in high demand, too.
Italy, France, and Greece
Major cities like Milan, Paris, and Athens, along with their respective holiday regions, tend to have the highest property values. Not only are they cultural and financial hubs, but they also attract significant international investment in general. In contrast, rural regions in these countries are usually more affordable investment opportunities.
4. Tools to Assess Property Value
Whether you plan on buying, selling, or investing, it pays to assess the property’s value beforehand, and you can do this via the following:
Market Reports
These are usually issued by real estate agencies or government bodies and provide a snapshot of:
- Recent property sales
- trends
- Valuations in a particular area
Real Estate Platforms
Websites like Rightmove give you online valuation tools that provide an estimate based on:
- Location
- Property size
- Recent sales of comparable homes
They’re only estimates, but they can serve as a starting point for your valuation process.
Professional Appraisals
You’ll always get the most accurate results by hiring a professional appraiser, but there’s a cost aspect to their services which makes them a bit less desirable at times.
5. Factors That Influence Long-Term Value
Several elements can either boost or drag down a property’s long-term value potential. Knowing what these are will help you make smarter decisions – especially if you’re investing for the future.
Market Trends
Property markets go through cycles of highs and lows, so you can maximise your profit by knowing when is a more appropriate time to buy or sell.
Infrastructure Developments
From motorways to schools, new developments push up property values. Unexpected changes, however, like construction that limits access to amenities, usually have the opposite effect.
Economic Conditions
Local and national economic health plays key roles in property value, with the following usually meaning high property costs:
- A booming economy
- High employment rates
- Low interest rates
Conversely, economic downturns tend to result in lower property prices.
Conclusion
On a global scale, real estate markets are always going to vary in price, but at least you now know the key factors that play into how much a property is worth.
Whether investing locally or internationally, understanding property value is key to making the right decisions. With Upscore’s Finance Passport, we help you secure the best mortgage deals across borders. Explore your options today!
