How Is a Property Valued?
Category Advice
A home is often a person’s biggest financial asset and selling it at the right price is crucial if one is to make it work to future advantage. The challenge lies in evaluating the property’s value correctly – undervalue it and the seller loses financially, overvalue it and it won’t sell. But how does one determine the true value of a residential property?
Steven van Rooyen, Principal of Leapfrog Property Milnerton explains that a property valuation is based on a number of factors; “A professional estate agent will be able to determine the value of your property based on its size, location as well as by looking at what similar homes within the area are selling for. Ultimately the property is only worth what a willing buyer will pay a willing seller”.
Milnerton as a case study
Van Rooyen notes that the R1 million to R2 million market in Milnerton has done well in 2015; mostly due to stock shortages. However, he points out that this situation has led to higher expectations amongst a number of sellers who have raised their asking prices. “At the moment we’re experiencing price resistance due to this and other economic factors and sellers who have inflated their asking prices are finding that their homes remain on the market much longer”, he explains. He also adds that he believes that most of the price growth expected for 2015 has already been achieved and that prices will likely not increase much further towards the end of the year.
That being said there is also no need to make the opposite mistake, by undervaluing a property. Milnerton for example has seen a lot of growth as properties in Cape Town itself become more expensive and the My Citi bus route makes commuting into town easier and cheaper.
Sectional title properties in particular are increasingly popular and in Milnerton Central these now sell for around R835,000 on average – up from R715,000 in 2014. Freehold properties have struggled slightly with an average price of R2.39 million (down by R200,000 from 2014). “Here is a perfect example of where an estate agent can assist by making a proper determination on price – at the moment buyers are looking for affordable, ‘lock up and go’ homes and hence the sectional title market is doing better than the freehold market in our area. As such sellers of freehold properties need to know that an inflated asking price won’t float at the moment.
My advice to sellers is not to be misled by emotion – trust accurate market evaluations from respected agents and let that determine your sales price”, says van Rooyen.
He cautions sellers and buyers to educate themselves on the market value of properties in a particular area so as to make the most informed decision possible when it comes to either selling or buying property. This can be done by working with a trusted property advisor and relying on their CMA (comparative market analysis).
Author: Leapfrog Property Group
