The valuation of a property can be a contentious issue. Sellers often struggle to understand what their properties are worth, which can lead to unrealistic expectations and unsold properties. It is therefore important to understand the current phase the property market is in.
The market value is largely driven by supply and demand and building costs. Building costs are driven by inflation. Supply and demand is driven by a number of economic factors, such as interest rates, disposable income, etc.
Property values usually increase when interest rates fall as this makes property more affordable and people buy rather than rent, which increases demand. Other factors that influence market value: Location, condition age, layout & current market trends.
In a declining or stagnant market one must caution against overpricing property. In a rising market it can also be very difficult to get the right balance between the best possible price and a quick sale. Overpriced properties can take longer to sell, which can be quite stressful and costly especially if the property is standing vacant and not earning income. Unfortunately a property that is on the market for too long sends out a signal that something could be wrong with it. By reducing the price after your property has gone to market you may give potential purchasers the impression that you are desperate and they may make offers under market value.
Estate agents normally use what’s called a Comparative Market Analysis (CMA) to determine the selling price of a property. This is done by analysing and comparing the property to those of a similar nature that were recently sold in the area. Your agent will also take into consideration, the property's proximity to amenities, condition and general appearance of the property, and current demand in the area for similar properties. A printed copy of the CMA will be presented to you.