Have you ever wondered what makes one property more valuable than another, even if they are in the same area? The answer is that there are several factors that determine the market value of a property, from its condition to its design, facilities, and services. Every little detail can make a difference, in addition to other important factors such as market conditions and economic circumstances.

In this article, we will explain the most important factors that influence property valuation, as well as the factors that reduce its value. 

What factors affect valuation?

Each property has its own story and circumstances, so it must be valued by a real estate valuer accredited by the Saudi Authority for Accredited Valuers. The real estate valuer studies these factors to accurately determine the market value of the property. The most important of these factors are: 

Location: 

The location of the property is one of the most important factors in real estate valuation, as properties close to government services such as hospitals, schools, utilities, and others have a strong impact on the value of the property. The type of area also affects the valuation, as quiet residential areas surrounded by services differ in value from commercial or industrial areas. 

Property condition:

This refers to the condition of the property in terms of age, level of regular maintenance, and timely repairs. Even older properties that have been well cared for, with ongoing maintenance and necessary upgrades, can retain or even increase their market value. Some of the most important factors that affect the condition of a property are: Regular restoration of plumbing and electrical systems, repair of any cracks in walls or floors, updating of paintwork and building facades, and maintenance of basic property facilities. All these measures make the property more attractive to buyers or tenants and reflect the care and seriousness with which the property is managed, which has a positive impact on its market value.

Property size and layout: 

There is no doubt that the space of a property is important, as it greatly affects its market value and price. The role of interior design cannot be overlooked either, as it is just as important as space, reflecting the layout of rooms and open spaces It affects the residents’ sense of comfort and functionality through smart design that allows for practical and aesthetic use of every space, significantly increasing the value of the property, whether in terms of natural lighting, room distribution, or the choice of materials and raw materials used in floors and walls.

Real estate market conditions:

Despite the importance of a property’s condition, age, location, size, and layout, real estate market conditions must also be considered, as they significantly impact a property’s valuation and price. When demand increases and there is a shortage of properties for sale, prices rise significantly, especially in large cities or areas close to government services. However, when there is an increase in the supply of properties or a decline in demand, prices fall and the value of the property decreases. 

Legal factors: 

These include verification of ownership rights, building permits, legal restrictions on the use of the property, and compliance with planning and building regulations. Therefore, any real estate valuer must consider these factors to ensure that the property is legal and compliant with regulations, as this affects its value. 

Interest rates and real estate financing: 

Interest rates are one of the most important factors that directly affect the real estate market, not only locally but also globally. When interest rates are low, real estate loans become more accessible and available to a larger number of individuals and investors, which increases purchasing power and demand for various properties, whether residential or commercial, and thus leads to a natural increase in their prices. When interest rates rise, the cost of financing becomes higher, which reduces individuals’ willingness to borrow and limits their ability to purchase real estate, thereby reducing demand and causing real estate values to decline in the market.

Government policies and legislation:

Government policies and legislation affect the stability and regulation of the real estate market. Subsidized housing programs, financing facilities, and incentives to purchase real estate help increase demand for real estate, while imposing fees on vacant land or restrictions on construction affect supply, which directly reflects on prices and market value of real estate. Policies that open the market to foreign investment also significantly contribute to increasing competition and stimulating real estate growth, particularly in large cities and developed areas. These policies influence the decisions of local and international investors and make real estate in certain areas more attractive and therefore more valuable.

In short, all these factors overlap to form the final picture of the value of real estate in the market. Accurate valuation does not depend on a single factor but on an integrated combination of location, interior design, condition, laws, and economic policies that determine the attractiveness and investment stability of the property.

When does the value of a property decrease?

After discussing the most important factors that affect the value of a property, it is also important to identify the circumstances that may lead to a decrease in its value over time. The most important of these reasons is: 

• The property is located in an area that is not close to government services or suffers from poor infrastructure. 
• Deterioration of the neighborhood or area surrounding the property, such as a decline in the quality of services or a lack of security. 
• Lack of attention to regular maintenance and repairs is causing the property to lose its value. 
• An increase in supply in the real estate market relative to demand leads to a decline in prices due to oversupply. 
• Negative economic factors, such as high inflation rates, increased interest rates, and weak purchasing power, reduce demand.
• Certain government legislation and policies, such as imposing fees on vacant land and certain laws to regulate the real estate market.

At the end of the day, property valuation is a precise process that depends on a bunch of factors, from the location and condition of the property, and the interior design, to the state of the market and economic policies. Knowing these factors helps owners and investors maintain the value of their properties and increase their appeal in the market.

If you are looking for a real estate valuer accredited by the Saudi Authority of Accredited Valuers, at Aain Real Estate valuation, we offer the best services to ensure you know the true value of your property and make the right investment decisions. Contact us now and start your property valuation journey with confidence.

Frequently asked questions: 

• Who should do the valuation?

To obtain a real estate valuation, the valuation must be carried out by a real estate valuer certified by the Saudi Authority of Accredited Valuers. The real estate valuer must also have a good reputation and extensive experience in valuing different types of real estate. 

• What happens during the valuation?

After providing the real estate valuer with the most important information, they will collect all the information and visit the site to verify the accuracy and validity of that information. The real estate valuer will then select the appropriate valuation method and write a valuation report in accordance with the approved standards. 

• What is the purpose of the valuation?

The purpose of a real estate valuation is to determine the true market value of the property based on a set of factors such as location, condition, size, and market supply and demand. This valuation helps owners and investors make accurate financial and investment decisions, whether in selling, buying, or financing. The valuation also ensures fairness in real estate transactions in accordance with approved standards.