Factors Affecting Real Estate Value
Real estate value does not arise in isolation; rather, it is the result of the interaction of several external and internal factors that an appraiser carefully studies before issuing an opinion. These factors are divided into four main categories.
First: Social Forces
These include changes in population size and density, family size, attitudes and beliefs toward education and social activities, as well as trends in urban design and public facilities. Higher population density in an area usually increases demand for its properties and contributes to higher property values.
Second: Economic Forces
These include natural resources in terms of quality, quantity, and location, economic and industrial trends, employment and wage rates, the availability of money and credit, interest rates, and tax burdens. The more active the economy and the lower the interest rates, the greater the demand for real estate.
Third: Political and Governmental Forces
These include zoning laws, building regulations, fire protection requirements, rent control policies, government-funded housing projects, and monetary and tax policies. A decision to change an area’s classification from residential to commercial may double the value of its properties overnight.
Fourth: Environmental and Physical Forces
These include climate, soil fertility, water availability, proximity to schools, mosques, parks, and recreational areas, as well as flood control and subsurface soil conditions.
Additional Factors Influencing Real Estate Value
In addition, several detailed elements directly affect property value, such as location, area, overall appearance, plot shape, street slope, accessibility, available services, supply and transportation lines, and proximity to airports and gas lines.