In Kenya, the value of properties has remained a popular subject of discussion. As time passes, buyers have been forced to deal with the ever-increasing prices of properties, which has led to a popular question: what or who decided the price of the property? One evident thing is that determining the property’s value isn’t a one-time thing. It involves several considerations and factors before setting up a price tag on a home or a piece of land. To come up with home’s sale price, there are flexible and inflexible factors to consider.
Flexible and Inflexible Factors that Influence the Home’s Sale Price
Flexible factors are those that investors can adjust to meet specific standards, such as design, materials, or amenities.
Inflexible factors like location, market demand, or government regulations are beyond their control. Understanding both is key to making informed investment decisions.
Factors influencing the Home’s Sale Price
When determining the sale price of a property, several factors come into play, each influencing the value in different ways. As mentioned earlier, factors affecting a property’s price can be controlled, while others cannot. Flexible factors, like property features, can be adjusted by the owner. Inflexible factors, such as location and market demand, are beyond control. In this section, we will explore these factors and identifiy whether they are flexible or inflexible.
Location and Neighborhood of the Property
This is the most dominant factor that both buyers and investors consider first.
Location and neighbourhood are inflexible factors because investors cannot change them. These factors influence property value based on accessibility, amenities, crime rates, and overall demand in the area.
They are also the main factors that influence the sale price. Location comes with convenience aspects regarding how close or far the property is from social amenities such as schools and hospitals. The price of properties close to such amenities will definitely be higher than those far away. The neighbourhood is also important as investors and buyers tend to look at aspects such as security before deciding to purchase a home. A place with less experienced crime will be more costly.
Comparison of the Recent Home’s Sale Price
Recent property sale prices are an inflexible factor since they are based on past transactions that investors cannot alter. Market trends, demand, and economic conditions shape these prices and determine future property values.
It helps real estate agents and investors set the right price. This prevents underpricing or overpricing a property.Comparing neighborhood prices reveals the property’s true market value. When using this method, you must be careful since it’s only an outward comparison. It does not consider the fact that finishing, furnishing, and features might be different, which usually make property prices vary.
The Cost of Initial Investment
This is a flexible factor because investors can control how much they spend purchasing, renovating, or improving a property. The financing choice, property condition, and scope of improvements can all influence the initial investment required.
The initial property cost, including purchase and improvement expenses, is a key factor in determining its sale price. While selling a property, no one wants to incur a loss. Thus, before deciding on the home’s sale price, the summary of the costs incurred is usually calculated first.
When it comes to determining the prices of the properties, inspection reports can work to the advantage of the buyers. Professionals are the ones who conduct the inspections since they will be able to alert you to previously uncovered issues that may need interventions, such as infestations. A home needing repairs will have a lower price since buyers must cover the repair costs. A well-maintained home with no issues will sell at a higher price..
Demand against Supply
Demand versus supply is an inflexible factor because it is driven by broader market forces. While investors can’t directly control these factors, they significantly influence property prices. When demand exceeds supply, property values rise; when supply outpaces demand, prices tend to fall.
Besides, the country’s economic state plays a major collective role in determining the property price. It involves aspects such as market demand and supply, inflation, interest rates, and investment appetite. Once the property demand increases in a particular area, the selling price will increase automatically.
Due to buying pressure, which may cause the demand to drop, the seller has no choice but to lower the sale price. The demand and sale of property depend primarily on the investment appetite of an area.
The Loans Interest Rates
This is an inflexible factor because financial institutions set it, and broader economic conditions shape it. These rates impact property affordability, as higher interest rates can reduce demand. In comparison, lower rates make borrowing more accessible, potentially driving up property prices.
Due to the current economy, many individuals depend on bank loans and other loaning agencies to invest in properties. If these loans’ interest rates are high, they would be non-affordable to many people, making them shy away from investing. This will lead to low demand in the market, causing the home’s sale price to drop. On the other hand, if the interest rates of the loans are low, the rate of investment will upsurge. Hence, increasing the property price too.
Regulations and Restrictions of the Property’s Location
These are inflexible factors because they are determined by local government laws, zoning regulations, and planning policies, which investors cannot control. These rules affect what can be built renovated, or how land can be used, influencing property values and development opportunities.
The zoning laws affect the property’s potential for development, investment, and usage. These makes the areas more or less valuable depending on their designated purpose. For example, a residential area may see a rise in property values due to demand for homes.
At the same time, a commercial or industrial zone might attract investors looking for land to build businesses. Still, the value would typically be lower for residential buyers due to zoning limitations. These factors, set by local regulations, significantly influence the property’s market value.
Property Features
Property features are a flexible factor because owners or investors can change them. This includes the number of bedrooms and bathrooms, the layout, and additions like modern kitchens, home offices, or pools. You can also improve how the property looks inside and outside, like the flooring or garden. The better these features are, the higher the sale price is because buyers like homes that fit their needs.
Economic conditions Will Affect Home’s Sale Price
These are inflexible factors because the broader economy controls them. Things like inflation, job rates, and the overall financial health of a country can affect home’s sale price. When the economy is strong, property prices usually go up, but when the economy is weak, prices tend to fall.
Take Away
In conclusion, the sale price of a home is affected by a mix of factors, some of which can be controlled and others that can’t. You can adjust the property size and condition to increase its value, but you can’t control location, market demand, or regulations. By understanding these factors, buyers and sellers can make smarter decisions and better navigate the real estate market. Recognizing both flexible and inflexible influences helps set realistic expectations and get the best value for a property.