FACTORS THAT INFLUENCE THE VALUE OF A PROPERTY

Posted on: December 14th, 2018 by Pamela Makhubela

Different factors and characteristics influence the valuation of a property. The greatest part of the valuation process encompasses the gathering and analysis of information. Some of the information gathered can be seen as “background information” and therefore is not physically visible at the house or dwelling being valued. Background information may include economic data such as interest rates, capitalization rates and environmental factors. This “background information” is, however, as crucial as the physical information.

The physical characteristics of a property that are taken into account include:

  • Size
  • Shape
  • Gradient and topography
  • Soil quality and
  • Access

The surrounding environment also has a great influence on the value of a specific property, notably:

  • Infrastructure such as roads, electricity, sewerage and storm-water drainage;
  • Location of properties with which regular contact is required, for example markets, schools, hospitals, shopping centres, police stations and municipality;
  • Location of properties having a negative influence, for example, noise from an airport or motorway, pollution from industries, and many more related factors; and
  • Location of similar properties that could compete in the market.

Information gathered can be categorized into the following comprehensive categories:

  • General information;
  • Information regarding the particular environment; and
  • Direct information.

A further classification needs to be outlined when it comes to residential properties. These properties are generally divided into two main categories, namely:

  • Special residential properties and
  • General residential properties.

Special residential properties refer to the use of land for a single dwelling. Some town planning schemes use the term “Residential 1” when identifying this category of a residential property in the municipal rates policy.

General residential properties refer to all other residential properties, such as hostels, block of flats, town houses and semi-detached houses. Town planning schemes use zonings like “Residential 2”, or “Residential 3” or “Special” to categorise these general residential properties.

The above General residential properties can be further divided into two classes:

  • High density and
  • Low density.

High density general residential properties are mostly multi-storey residential buildings in which dwelling units of all classes are contracted.

Low-density general residential properties refer to the use of land for single dwelling units, but at a higher density than special properties. This class can be further categorized into various subgroups, the most important of which are the following:

  • Town houses, which are registered in the owner’s name on a sectional title basis and where the interests of the owners are looked after by a controlling body on a community basis.
  • Group housing, where each dwelling unit is on a separate subdivision and ownership is registered by means of individual title deeds.

The low-density group is, of course, related to special residential properties and is therefore influenced mainly by the same factors.

The rights of a property are restricted and regulated by laws, ordinances, local authority regulations, zonings and restricted title conditions. A further account is taken of the common law rights of neighbours and the rest of the community.

Statutory limitations include the following:

  • Provincial ordinances;
  • Local authorities for example zonings in terms of town planning schemes which determine the land, use, height, density and floor space ratio; and
  • Title conditions restricting conditions in the title deeds of in the property.

In conclusion, there are various factors that are taken into account when valuing an immovable property. Some of these factors are visible and some not. It thus takes in-depth work to gather tangible data in order to compile a well-informed valuation.

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