What determines the value of property?

What determines the value of a property?

The Value of Property

Land for Sale in Kenya

In terms of value of property, you may often wonder why one plot will command a higher price than another or why one apartment will be sold at a much higher price as compared to the rest even though they are located in the same vicinity or even the same compound.

For you to appreciate the reason behind these differences, it is important for you to understand the concept of value.

The measure of benefits provided by a service or a good to the user of the product is what we refer to as value. It is expressed in monetary terms in order to facilitate exchange of the goods or the services. Value is not the same as cost or the price paid for that good or service. Value is inherent, and can be better seen as the benefits to be experienced by a land owner from a property in the future.

Market value on the other hand is the estimated amount for which a property exchanges on the date of valuation between a willing buyer and a willing seller where the parties have perfect knowledge about the market and act prudently without any compulsion. The value of any property should be objective. In most cases it is influenced by certain factors.

The Scarcity

Scarcity is simply how rare a product is. When a product is in short supply, demand for that said product will be very high since it elicits desire in many people to acquire.

This is simply because anything easily that can be easily obtained is never considered of high value.

In simpler terms, the few plots located in prime places command higher prices since they are limited.

The Demand

Demand is the ability for a purchaser to pay for desired good so as to acquire it. Good things naturally attract high demand since a lot of people want to own them. According to the economics principle of demand and supply, when demand increases and the supply is constant, the price of the commodity automatically increases.

However, since the supply of land cannot be changed, increase in demand pushes the values of the property up.

The utility

Utility is the measure of the usefulness that a consumer ideally derives from a good. It is the ability of a product or a commodity to provide its expected benefits.

In the real estate sector, it can be described as the benefits that a land owner obtains from using his property. In rental units, utility is the ability of these units to bring in income in the form of the rent that the tenants submit.

The ease of transfer

Transferability is the process of transferring property from one person to the other. The pieces of land or properties that can be easily transferred from one person to another are preferred since the sellers can complete the transactions faster and move on with other things.

Transferability therefore is considered the most important indicator of value in real estate. A simple scenario is how you may find small structures and shanties built on large pieces of land. However, as prime as these lands may be, no sale can proceed since transfer of property is hindered.

Valuation

In as much as you may tend to believe that value of a property may indeed lie in the eyes of the purchaser, it is very important for potential property purchasers to be guided by facts and not by pure impulses as real estate investments are very delicate.

Any property that is located in an area with high demand, provides the intended utility and is easily transferable thus is bound to command higher value.

If you’re looking to buy land, or get more information in regards to land on sale in Kenya, reach out to a company that provides value added plots such as Denver Group Limited for the best land purchasing process.