Changes in Lagos house prices regularly make headlines around the country, but what influences property value?
What is property value? Whether you’re buying or selling a home or investment property, the question is how much is the property really worth? Rising house prices and market cycle trends are common topics explored by news media.
From supply and demand through to location, facilities and planned infrastructure projects, there are plenty of factors that can influence property value. Read on to find out what drives property prices up, what drags them down and how you can find out what your property is worth.
Factors that affect property value
Location, location, location. The location of a property is the most obvious factor that affects how much a property is worth. Is it close to the city centre? Is it in a sought-after waterfront location? Is it close to public transport, shops, schools and restaurants? People generally want to live close to where they work and where they enjoy their free time, so properties in these areas will be more expensive. Then there’s also the fact that some suburbs simply have a better reputation than others due to factors such as unemployment or crime rates.
Supply and demand. If demand exceeds supply in a given market, property prices will increase. This is because there are more people in the market for a smaller number of properties and the competition to secure a home drives prices up.
Interest rates. When the Central Bank changes monetary policy, this can affect the value of property. If the Central Bank raises the official cash rate and lenders around the country follow suit with their home loan interest rates, the average monthly mortgage repayment goes up. This has a huge impact on property affordability, so there’s less likely to be competition in the real estate market and prices will drop. Conversely, an interest rate cut means it’s more affordable to buy and property prices will increase.
Economic outlook. The overall performance of the economy can also have an impact on the property market. If the economy is experiencing strong growth, employment and labour conditions, more Nigerians can afford to purchase a property, which leads to rising property values.
Property market performance. The performance of the real estate market in your local area can also affect how much your property is worth. If there’s little demand for houses in the neighborhood and the properties listed are selling for well below the asking price, expect values to fall.
Population and demographics. The more people who want to live in a particular suburb, the greater the demand for properties in that suburb. At the same time, the type of people living in the area will also influence property values. For example, if young families are the dominant demographic group in the area, multi-bedroom houses will be more sought-after than small apartments.