Properly priced property: Here's how and why
Category Newsletter: Lead Article
While there are many factors that influence the appeal of a property, price is what ultimately sells the place. This is the view of Kim Hogben, Franchisee at Leapfrog Durban Central.
"The right price means right for what the property offers, right for the location and right for the market. When these things are in alignment the price will be right and the property is likely to move quickly," she says.
Properties that are priced too high quickly become "stale" and then potential buyers lose interest because it's been on the market too long. Pricing a property too low, on the other hand, is likely to see the seller losing out on potential profit to be made on transaction.
"Price, like so many other aspects of property, is a very emotive subject for buyers. Nobody wants to over pay for a property but by the same token people actually also don't want to under pay because it creates skepticism around the value of the property," Hogben shares.
Market conditions
Prevailing market conditions have a keen impact on how the right price is determined.
In a seller's market, for example, there is typically less stock which means buyers are often willing to pay slightly more for a property than they would have in a buyer's market. Similarly, the interest rate also affects what buyers are willing and able to pay for property.
"After a record-low spell, brought on by the pandemic, the interest rate is relatively high again, which means buyers are looking for value for money," Hogben believes.
Location, of course
Location always plays a role in property transactions. A general rule of thumb is that a property in a desirable area will always fetch more on the market than a grand property in a less desirable area.
Understood differently, a three-bedroom house in Bishop's Court is not comparable to a three-bedroom house in Bellville - the prices will be vastly different because the locations are poles apart.
"Buyers are often willing to pay more for a run-down property in a sought-after or popular area because they know it's far easier to improve the appearance and structural issues of a single property than improving the desirability of an entire area or location, so they're really paying a premium for the location," Hogben explains.
Having said that, properties should always be priced in line with similar properties in the area. Buyers today have property information at their fingertips so are likely to be familiar with the market average for a particular area.
Condition of the property
Renovations and improvements, whether structural or aesthetic, can go a long way in boosting the value of a property but there isn't necessarily a direct link between what the seller has spent and what the buyer is willing to pay.
Some improvements - think renovated kitchens and bathrooms - almost always add value and influence the selling price upwards, but improvements that speak more to personal preference don't always.
Opting for custom engineered wooden flooring in a two-bedroom townhouse, valued at half a million, may speak to the preference of the owner, but probably won't see a buyer offering significantly more for the property because of it.
Manage expectations
For most sellers the goal is to shift the property as quickly as possible and this is easier when the property is priced right for its current conditions, for the area where it's located and the overall sentiment of the market at the given time.
"If most of the properties in the area recently sold for between R1 million and R2 million, it is highly unlikely that your property is going to sell for R3 million, even if you have spent R1 million on improvements," Hogben says.
Property pricing is a purely financial decision. View it transactionally, rather than emotionally.
The right price can be the difference between a property selling in two weeks, or in two months. Make sure to not underestimate the importance of pricing property precisely.
Author: Leapfrog Property Group
