Location and the property price tag

Location has long been held as the most crucial consideration when purchasing a property. “When you buy a house, you’re not just acquiring a home, you’re buying the neighbourhood too,” says Anne Porter, Chairman of Knight Frank Residential South Africa. “Moreover, the area affects the asking price of the property.”

She explains that there is a multitude of reasons for this, one of which is that property buyers pay a premium for good views, quiet surroundings and proximity to facilities for education, transport, worship, healthcare, shopping and recreation. In South Africa, security is a key consideration with areas that have lower crime rates and greater safety records attracting higher prices than others. “Neighbourhoods with these characteristics also drive demand.  Consequently, as the law of supply and demand dictates, when there is high demand for a particular product, the price rises.”

“Similarly, if there are a lot of properties for sale in a location, the market will drive prices down compared to a similar neighbourhood with few properties for sale,” adds Porter.

In terms of receiving a return on your investment, Porter says, “While buying the worst house in the best area you can afford has often been touted as sage advice, in reality this strategy has had mixed results.  It is highly unlikely that the more unkempt properties will outperform the best ones unless there is a drastic change such as major investment and renovations in the homes that need it. Factors such as condition, view and demand for the type of property will also influence the change in price of the lower value properties.

Important to note though, is that the more affluent the area, the worse the worst properties perform. What’s more, when valuing properties, agents consider what similar properties within the same area sold for and use that as part of their estimations.”

Although the area as a whole does have an impact on the price of a property, she advises keeping the following in mind: A property on a quiet street within a residential area will attract better prices than a similar property in the same area but located in busier streets. In addition, when it comes to high-rise residential buildings, the higher the apartment, the better the view and thus the more valuable the property.

“Whether you are buying a property as an investment, a lifestyle upgrade or both, one of the most important decisions you will make is its location. Not only will this help determine the future value of your return, but also the many facets of your everyday life. Ultimately, however, you get what you pay for,” concludes Porter.